Benefits of a Captive

When you need to insure the un-insurable, when the retail price is too high, when you want to control your own risk, a captive might be a good option for your company.

What are the benefits of forming a captive?

There are many sound business reasons for setting up a captive:

  • Insuring the uninsurable - providing coverage either not readily available in the commercial market or priced prohibitivly
  • Cost reductions - reducing expenses such as administration and settlement of claims, loss control expenses, various state and federal taxes, brokerage commissions, and other acquisition costs and consulting fees
  • Risk retention, risk management and loss control - a company that has a better loss history than the industry average can typically achieve lower premiums/ by retaining its own risk
  • Cash flow benefits - earning investment income and using more flexible premium payment plans
  • Access to the reinsurance market - accessing directly the reinsurance market which can be less expensive than conventional direct excess and umbrella coverage; there is also the opportunity to reduce costs by combining two or more lines of risk
  • Diversification into a profit centre - diversifying into open market insurance operations and operating as a separate commercial profit centre, including any profits generated from third party unrelated business
  • "Unbundling" of services - unbundling technical services provided by its conventional insurer, such as separating risk control and claim handling services from the actual purchase of insurance cover
  • Reduction of government regulations and restrictions - domiciling in a professional, yet flexible regulatory environment widens investment opportunities and facilitatates legitimate global capital flows
  • Tax minimisation or deferral - creating the potential to minimise or defer tax payments through properly structured and adequately capitalised captive insurance arrangements


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Whenever you find yourself on the side of the majority, it is time to pause and reflect.
Mark Twain

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