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Turn Your
Insurance Premiums
Into A Profit Center
Discover the Many Benefits of
Privately Owned Insurance
(aka Captive Insurance)
An Alternative Risk Management
Solution for Businesses
The Concept
A Privately Owned Insurance Company (POIC), or a Captive Insurance Company (CIC), is a tool to manage the insurance risks of operating a business, while providing the owners of the business substantial benefits beyond the purchase of commercial insurance. A POIC is an insurance company created for the primary purpose of insuring the risks of an operating business and its affiliated companies.
Establishing a POIC allows the operating business to take control of its risk management by allowing it to insure risks for which coverage may not be available in the commercial market or may be prohibitively expensive. Private insurance is often less expensive than commercial insurance, because it can be tailored to the needs of the operating business.
In addition, because the POIC and the operating business generally share the same or a related owner, the POIC can be a Profit Center, instead of a drain on resources. A POIC may also offer favorable tax advantages in the areas of wealth preservation and transfer.
Private insurance is a proven strategy for risk management that large corporations have employed for years. Many Fortune 500 companies have POICs, or Captives, and several well-known insurance companies got their start as captives. Because of recent developments in the law, private insurance has become a strategy that small to mid-sized businesses can employ. Our private insurance consulting services are designed to guide businesses through the process of establishing and managing a POIC from start to finish.
What kind of insurance
can a POIC provide?
A POIC can provide insurance for any legitimate insurable risk. Typically, a Captive will offer insurance that is either not available in the commercial market or prohibitively expensive in the commercial market. The types of risk that a POIC can insure include, but are not limited to:
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General Liability
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Administrative Actions
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Business Income Protection
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Computer Operations and Data
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Product & Services Warranty
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Litigation Expense
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Contract Cancellation
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Loss of Key Customer
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Loss of Key Supplier
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Loss of Key Employee
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Accounts Receivable
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Intellectual Property
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Mold Remediation
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Earthquake & Volcanos
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Body-Part Insurance
Benefits of Private Insurance
Filling the Gaps
Private insurance can replace or supplement traditional forms of insurance available in the commercial market. Commercial insurance may not provide adequate coverage for certain types of risks. In fact, the commercial market may not even offer the types of insurance that a particular business requires. In addition, a captive can fill gaps that are built into commercial insurance, such as deductibles, policy exclusions and policy limits.
Risk Transfer
A POIC is an insurance company, and, like any insurance company, it provides protection against risks that a business faces on a daily basis. While some of these risks may be remote, they could have catastrophic consequences if they were to occur. Private insurance allows a business to transfer these risks to an insurance company, so it no longer is forced to self-insure these risks.
Cost Efficiency
Private insurance may be more cost-effective than commercial insurance. Because the primary purpose of private insurance is to insure the risks of an operating business, a POIC can tailor its coverage to the needs of the operating business ... Costs may be further reduced, because a POIC does not have many of the expenses faced by a commercial insurance company...Another cost-efficiency may be reinsurance. Reinsurance is insurance for insurance companies and is generally not available to the general public. An insurance company can reduce its risk exposure through reinsurance, thereby lowering its costs. Because an insurance company may have access to the reinsurance market, it can reduce its risk exposure and pass on the savings to the operating business.
Profitability
A POIC is an independent business, separate and apart from its related operating business, and like any business, it is in business to make a profit. To the extent that premiums paid to the POIC exceed claims paid by it, the premiums paid by the operating business go to the bottom line of the POIC.
Estate Planning and Asset Protection
A POIC can offer the same estate planning and asset protection opportunities as any business. If the owners of the POIC are the children of the owner of the operating business, then assets can pass from one generation to the next, often without gift tax considerations.