Captive Insurance
The Strategic Value of Captive Insurance for Your Business
No one knows your business like you do. If your organization has reached at least $10 million in annual revenue, a captive insurance company may offer you a formalized self-insurance solution that reduces business risks, enhances cash flow, and provides greater tax efficiency.
Companies of all sizes have used captive insurance entities for over 100 years, including many leading Fortune 500 organizations. Today, businesses most likely to consider captives have achieved steady revenue and possess a committed leadership team seeking alternatives to existing commercial solutions for some of the following advantages.
Reduce Insurance Costs
Increasingly expensive commercial insurance rates may be one reason to consider switching to captive solutions. Rising interest rates, inflation, and other factors have caused a sharp increase in the cost of commercial insurance, but self-insurance can be a more affordable option.
Close Gaps in Your Existing Insurance
As your organization grows, you may need a more specific insurance policy than your commercial insurer can provide. Commercial policies may not offer a sufficient degree of coverage for the risks inherent in your business, from handling volatile chemicals and industrial materials to fully insuring against the loss of key leaders. This kind of coverage gap may expose your business to serious financial harm.
Customize Insurance to Your Risk
With a captive solution, you prioritize the items to cover. You can create a policy tailored to risks inherent to your industry, organizational structure, and location.
Control the Claims Process
Another benefit: Self-insurance through a captive puts you in control of the customer experience. As the primary or sole insured party, you’ll see your claims receive prompt attention and almost immediate payment.
Access Cash Flow and Other Strategies
A captive insurance entity also adds flexibility to your overall business planning. A loan of assets from the captive may enable you to supplement a new venture or expansion or access cash at a crucial point. In addition, you can leverage a captive insurance entity for more effective risk management, cash flow, and tax efficiency as part of your overall financial portfolio.
This flexibility depends on strong investment performance within the captive’s investment portfolio. The captive must remain solvent to not only pay claims but also to hedge against future risks and claims. The ability to fuel business growth and supply additional cash depends on growing the investments safely over time.
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To learn more about Steel Tower’s unique multidisciplinary approach, contact us.