Captive Insurance Companies Offer Both Commercial and Tax Benefits

Captive insurance companies have been a popular tax and business planning tool since many years. Earlier, only multinational firms used captive insurance companies, but that concept has changed now. Today, a wide range of businesses use them. A captive insurance company funds for corporate groups in the form of workers’ compensations, employees’ benefits, third-party liabilities, product recall, extended warranties, and so on. A captive insurance firm saves cost on insurance too. There are several costs saving tools worldwide that range from risk management to claims processing activities.

Loss deductions for a corporate group

A captive insurance company comes under the IRS (Internal Revenue Service) and case law. It provides tax benefits in the form of tax deductions. Before making the payments to the claimant taxpayers generally cannot deduct the losses, it means before the loss has actually produced. A captive insurance company can get the loss deduction for both reported and unreported losses.

Captive insurance coverage advantages

A captive insurance company can modify its policy and coverage to meet your risk management related requirements. It is easily available, stable, and cost-effective for your broad business coverage as compared to other traditional insurance companies.

Captive insurance claims payment

A captive insurance company offers lesser formalities when it comes to managing loss claims. The relationship of a claimant with a captive insurance company is less formal than a traditional insurance company.

Captive insurance provides you full control

A captive insurance company provides you complete control. You can hold all the stocks and handle all the bank accounts on your own. It can also help you get better control on the losses by giving you a carrier and the required resources to classify, calculate, and handle the costs.

Captive increases guaranteed profits and investment income

The amount of premiums you pay to the captive insurance companies can create the financial potential of your company. It also enhances surplus. If the captive offers good claims, it can produce a remarkable sum of guaranteed profit for the captive owners.

Captive insurance company generates new profit

When captive insurance companies were started, initially their aim was to reduce the cost of commercial property and casualty risks insurance. Captive’s parent corporation or the stockholders used to own most of the businesses. Ultimately, a number of captive insurance companies had decided to significantly raise the amount of unrelated risks. This was an attempt to earn profit from unrelated risk underwrite opportunities.

Captive insurance company produces new risk financing alternatives

You can take advantage of a broad range of risk financing alternatives by owning a captive insurance company. This also includes risk securitization programs. All such financing options are only available with a captive insurance company.

Jennifer Boerio - About Author:
Roundstone Management, Ltd. (“Roundstone”) based in Westlake, Ohio is a Captive Insurance Company focused on the development, underwriting and servicing of alternative risk products, including captives, rent-a-captives and specialty Captive Insurance Programs. Roundstone offers intermediaries and buyers an expertise in the captive marketplace utilizing the facilities of Round stone Insurance, Ltd

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