Overview of Captive Insurance Companies A properly structured captive insurance program can provide a variety of benefits to the business, some of which can be easily computed while others will require a captive to be in operation before the benefit may be quantified. Some of those benefits are below:
Business Benefits
Operational Benefits
•Reduced cost of coverage •Obtaining coverage that may not be available or cost prohibitive in a “hard” market •Ability to plan/supplement for employee benefits related expenses •Centralization of risk management •Lowering of the capital requirements through risk pooling •Efficient investment of reserves •Flexibility in insurance policy language •Tax-efficient risk financing and capital management
•Direct access to reinsurance market •Access to Terrorism Risk Insurance Act •Provision of desired vs. available coverage •Certification of insurance coverage •Mitigation of market swings impact on commercial insurance pricing •Predictable costs at subsidiary level •Spreading of risks among affiliated group •Improved risk retention capability •Better management of certain large future exposures
AEC EXECUTIVE ROUNDTABLE
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