Captive Insurance Companies
Click here for a brief PowerPoint Presentation on Captive Insurance Companies
Plan Comparison |
Retail Insurance |
Self Insurance |
Captive Insurance |
Lower Insurance Cost |
No |
Yes |
Yes |
Provides Protection from Risk |
Yes |
No |
Yes |
Tax Deductible Premiums |
Yes |
No |
Yes |
Policy Design Flexibility |
Yes |
Yes |
Yes |
Control Claims |
No |
No |
Yes |
The principal advantages of captive insurance are:
Flexibility in policy design, premium payment timing, and claims handling matters
Access to the reinsurance market not normally accessible to non-insurance entities
Participation in underwriting profits
Accrual of investment income on outstanding claims
Improved risk management and retention
Cost stabilization
Provision of covers unavailable or overpriced on the conventional market
Detailed investigations must be made on a case by case basis, in order to match the best risk management strategies and facilities with the requirements of the group concerned.
The process of making a claim from a third party insurer can be long and can involve a good deal of cost for the claimant. Where the insurer is a captive, the claims handling procedures can be dictated by management, cutting down on the delays and bureaucracy that are often a necessary part of the claims handling procedures of commercial insurers.
The group's risks can be limited by the purchase of insurance above the limits provided by the captive or through the purchase of reinsurance for the captive. A captive may, subject to regulatory permits, offer cover for almost any type of insurable risk and may insure every risk of a corporate group or confine itself to certain categories of risk.
When the market is soft, captive companies can take advantage of the lower rates by reinsuring a relatively large proportion of its risks. The low cost of reinsurance allows the captive to build its reserve base. When the market hardens, the captive is able to retain a larger proportion of its risks, and can maintain cover for its parent even when commercial insurance is unavailable or prohibitively expensive.
If you would like more information of Captive Insurance Companies, contact [email protected]
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