Bo Leslie Brower - Captive Insurance – does it fit in your strategy?
What is a captive insurance company and how can a small business take advantage of a captive? A captive is an insurance company established to insure the specialized risks of an affiliated business entity. It issues policies, collects premiums and pays claims. A captive can be owned by one or more business owners and can be a financially efficient tool in managing risk. Businesses typically have a number of risks that fall outside of the underwriting guidelines of traditional insurance and these specialized risks may be insured through utilizing a captive structure to finance potential losses in a formal structure. A captive must be formed as a C-Corp and can be domiciled in the U.S. or offshore. There are several ways to form a captive insurance company, including but not limited to: single parent captives, group captives, pure captives, self-contained protected Cells, risk-retention groups and producer-owned reinsurance companies. The purpose of a captive is to insure risk that is currently being self-insured against by a business. Some examples of these risks may include deductibles, limitations of existing insurance policies, certain types of coverage that are unavailable through the commercial market, or difficult to obtain like deductible reimbursement, cyber risk, director and officers liability, litigation expense, or loss of key customers and suppliers, etc. A captive allows a business owner to have greater control in managing risk, controlling premiums and paying claims. Tax Considerations