Does Captive Insurance make sense for your business?
May provide a way to protect your business and assets and provide tax advantages.

A captive insurance company (commonly called a “captive”) is an insurance company formed by a business owner to protect against uninsured or underinsured risks. It is a real, licensed insurance company, with policies, policyholders, underwriting, reserves, surplus, claims, etc. The operating company pays premiums to the captive, and the captive insures the risk of the operating company.

 

Captives have been around for over 90 years and were originally pioneered and used by major U.S. corporations. 80% of the S&P 500 use captive insurance programs including UPS, Mobil, Humana and Carnation.  Allstate Insurance began as a captive for Sears and is now a household name in its own right.

 

It used to be that captives were only for large corporations. Today, thanks to lower costs and favorable tax regulations, captives are no longer just for giant conglomerates. Family-owned businesses and private practices can take advantage of the same benefits. Thousands of profitable companies have started captives with taxable income ranging from $1 million to $100 million – including medical groups, real estate developers, high tech firms, hedge funds, manufacturers, importers, associations, professional practices, higher education institutions, contractors, service and hospitality industries, and others.

 

The first and primary role of a captive must be to insure against risk. Not all risks are appropriate for a captive to assume. Captives can be used for malpractice coverage and almost any property and casualty risk, even if commercial coverage is not available. Actuaries and attorneys who are familiar with the operation of a captive can help identify relevant but often overlooked risks. Because captives are, in essence, insurance, your business should be in a better position to survive the unexpected.

 

A properly-structured captive can provide attractive benefits to a growing company. These potential benefits include:

 

  1. Participation in underwriting profits
  2. Risk management
  3. Cost reductions
  4. Cash flow benefits
  5. Taxation
  6. Asset protection

Captive formations are complicated and should be left to tax lawyers, actuaries and CPA’s who are familiar with the structure and operation of captives. Sage Financial Partners works shoulder to shoulder with some of the most experienced captive planners in the U.S. – highly trained specialists who have executed hundreds of captive plans for privately held businesses, mid-sized companies and multinational corporations – and who understand the ongoing tasks required to keep the captive compliant with laws and regulations.

 

Click here to start a conversation about a Captive Insurance Company.