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Captive Insurance
every business is unique
Finding the Right Insurance for Your Company Isn’t Always Easy.
Your business has unique staff and needs that require the right set of policies. If you’re having trouble getting that perfect coverage, maybe it’s time to become your own carrier and form a captive insurance company. We can help.
This type of insurance can offer advantages in risk management, insurance savings, wealth transfer, and taxes. It’s an alternative type of risk transfer used by major corporations, nonprofit organizations, and medium-sized businesses
How Does Captive Insurance Work?
You will become a “captive insurer” when you and a group of other business owners retain some of your own risk. Instead of purchasing insurance from a third party carrier, insureds in a captive are putting their own capital to work inside the captive insurance program.
You might like this option if certain insurance coverages are in short supply in the commercial market or if those coverages are expensive.
What Are the Benefits of Captive Insurance?
Captives are valuable alternatives to other risk financing plans. When properly structured, they have the following advantages:
Reduced cost of risk
Cash flow benefits
Coverage not available from commercial insurers
Direct access to the international market of reinsurers, which can be more flexible
Increased bargaining power with commercial insurers (if the captive holds a percentage of insurance)
Cash flow advantages on income taxes (premiums paid to a captive insurer can be tax-deductible, depending on several factors)
Let’s look at an example.
Imagine your company pays an insurance carrier $450,000 per year in premiums, but your annual claims only average about $125,000. That means the insurance company is pocketing $325,000 annually.
However, if you start your own captive insurance company, you can set your yearly premiums at $225,000. If you only use $125,000 for claims in the first year, then you can get $100,000 in untaxed earnings—that’s on top of the $225,000 you saved originally.
How Can MTG Help With Your Plan?
If this is the right plan for you, our team can help with the actuarial, accounting, tax, and legal issues and develop a stable, profitable program. We provide assistance with:
Background and financial goals
Reinsurance marketplace potential
Desired captive design
Actuarial or data issues
(loss data or exposure information needed)
Insurance company expense loads