Business owners, entrepreneurs, and stewards of large organizations always look for effective ways to cut costs while improving performance. Enterprise risk management is one aspect of an organization that accounts for a large portion of the expenses. Therefore, companies should seek uniquely designed solutions for enterprise risk.
Understanding Enterprise Risk Management Through Captives
We advise our clients to transfer risk by creating captive insurance structures to mitigate risk in commercial activities. Apart from reducing how much is paid as insurance expenses, captive insurance arrangements are typically deductible, meaning organizations can access larger annual deductibles.
It is common for small firms or even individuals to wonder why the cost structure of a large corporation is usually less than what should have been obtainable. This is because innovative firms now use private insurance solutions created by their captive management partners like us. They enjoy the advantages of strategic risk management solutions while improving their performance.
Any organization that has tested captives' private insurance program management will not return to conventional insurance coverage.
The Business Case for Captive Insurance
When your organization has a captive insurance structure, it has its own insurance company that handles its risk management. An organization that keys into owning its insurance vehicle tends to save up on agent commissions, marketing, ads, and so on. These could translate to massive savings, which can be used by the organization that owns the captive structure. Apart from that, owning a captive insurance platform means that you can protect your company from paying a lot to have access to coverage for those risks that are considered expensive by conventional insurance firms.
Another reason many companies are embracing this structure is that they are unable to get unique coverage for some types of risks from conventional insurance companies. Owning a captive structure is a win‐win for any company that knows its onions. The company must partner with astute captive management partners like us to customize solutions for its risk needs.
Core Financial Benefits
The parent company will have access to tax deductibles on the insurance premium that was given to the captive structure. The organization will have access to a lot of tax savings benefits. The parent and the captive will have access to income tax savings, which many organizations crave.
Apart from that, the shareholders can embrace the benefits of gift and estate tax savings. The organization will be given the leeway to garner wealth by using a captive. For those organizations that want to protect their assets, the captive may be the right for them. We advise our clients to use the captive system because distributions can be given to them at favorable income tax rates. Every company wants to have its assets protected against claims from personal or business creditors. When a company uses our help to create a captive structure designed for itself, it can gain this.
Strategic Advantages of Captive Structures
An organization that uses a captive structure tends to pay far lower premiums than its counterparts that do not. When our clients use a captive structure, they can benefit from the reinsurance market that costs next to nothing. Some organizations are unable to get proper insurance coverage for some risks. The captive structure offers them. The organization has access to underwriting flexibility. When a captive structure is opened, marketing costs, advertising costs, overheads, and other costs are saved as underwriting profits. The organization that owns the captive structure can then use these profits. The organization will have access to increased coverage.
Asset Protection and Wealth Building
The truth is that many traditional insurers do not offer the specialized and intense coverage that some companies need. The coverage that they may offer may scratch the surface at best. A captive structure will give your company better coverage than conventional insurers. Our feasibility analyst team will look at your business structure and seek the proper captive structure for your organization. Your organization can make purchases based on need. Instead of taking out unnecessary conventional insurance coverage for one reason or another, a captive structure allows companies to use only what they need. Utilizing a captive insurance structure means organizations can examine their risk exposures. They can find out what is making them lose money. It is then easier for them to adopt better risk management techniques.
Implementation Considerations
Different organizations may need a captive structure for one reason or the other, but the various reasons usually boil down to one. They want to clamp down on their cost centers. We can help your organization create the proper captive structure based on its needs.
Want to find out if a captive insurance company is the right fit for your business?
Take the assessment to learn more:
https://www.riskmgmtadvisors.com/captive-insurance-fit-assessment
