Leveraging a Captive Insurance Company

Jun 29 - Construction CaptiveCaptive insurance companies are quickly growing as an effective alternative strategy for contractors of all sizes to achieve their financial and risk management objectives.  Captives are essentially a form of self-insurance whereby the insurer is wholly owned by the insured.  As a high-risk industry, the construction industry is now leveraging captives more often than in the past.  Would it be logical to have a captive insurance company for your construction business? As with every important decision, there are benefits and risks.  Here are some advantages and disadvantages to starting a captive insurance program:

Advantages

  • Wider range of coverage options
  • Upfront savings
  • Potential for significant returns and earned investment income on premiums
  • Enhanced claims management
  • Tax savings to the parent company

Disadvantages

  • Large amount of capital needed up front
  • High internal costs for the time and resources
  • Higher IRS scrutiny

A captive insurance company is typically most effective for contractors that consistently are at the top of the industry in terms of size, financial stability and claims. To determine if a captive program would be beneficial to your organization, or to learn more about AssuredPartners NL’s construction services, visit AssuredPartners NL Construction.

Source: NAIC

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