Captive management insurance is a policy that allows businesses to cover their own interest rather than relying on an intermediary. Ultimately, most businesses cover exposures by securing an insurance policy from a private insurer. This private insurer will assess the business’s risk, underwrite a policy, and cover their exposures. However, captive management insurance offers an alternative to this process while ensuring a company has coverage to protect against liabilities.
Explaining Captive Management
What is captive insurance — and more importantly, who needs captive insurance? Read on to better understand what this coverage entails and see if it’s the right option for your company.
Captive Management Is Self-Owned
Captive insurance takes ownership of the policy and sets its own rates. There are some benefits this can come to a business from this process. Moreover, a business can retain the funds that usually go to another company when paying a premium. A captive company can manage its own claims and determine the best payout process.
It Empowers Insureds
The most significant benefit of captive insurance is simple — control. By creating a captive insurance program, companies can eliminate the uncertainty that a commercial insurance policy entails. There are no unexpected premium increases, claim denials, or policy changes. This level of predictability can empower companies that seek to minimize their liability without surrendering control of their insurance to an external insurer. Companies can also tailor coverage to meet their unique needs, which is ideal for businesses that operate in niche industries.
It Can Be Profitable
The other significant benefit of a captive insurance program is the profitability that it can provide. Most companies accept their insurance premium payments as a necessary expense, but a captive insurance program allows companies to keep these funds and minimize capital losses. Companies can then invest their own premium payments and reap the profits from these investments. It can tremendously benefit companies as cash flow can grow through investments and boost profitability. In contrast, a commercial policy would allow this profit to go to a third party.
Captive Management Solves Problems
Finally, captive management policies can solve many problems facing companies with outstanding liabilities. Some businesses may have difficulty obtaining affordable insurance through a commercial provider because of high risks, obscure liabilities, and other challenging problems. A captive insurance program can mitigate these issues and allow a company to gain coverage without an endorsement from another insurer. This type of policy can also be advantageous for companies that way to protect their assets. By implementing a more sustainable insurance solution, companies can save on taxes, grow profits, and minimize the losses from continuously paying out premiums to an insurer.
