A captive is a closely held insurance company established to insure the risks of its parent company and affiliated groups. Determining if it be logical to utilize a captive insurance company for your construction business can be complicated. As with every important decision, there are benefits and risks. In this three-part blog series, we will discuss the benefits of a captive, questions to consider, and the best ways to form and operate a captive. Some of the advantages of starting a captive insurance program include:
- Flexibility in policy design and coverage, premium payment timing and claims handling
- Coverage for unique or specific risks that would not otherwise be transferable in the traditional market
- Customized coverage specific to your particular business, as well as non-traditional coverage
- Greater Control giving you the power to coordinate and improve your risk management program, turning it into a viable profit center for your business.
- Underwriting profit and investment income: Premiums paid into the captive can be invested to grow the financial strength of the company and increase surplus. If the captive has good claims experience, it stands to generate a tremendous amount of underwriting profit for the captive owners.
- Price and underwriting stability in hard markets: Surplus built up from prior years can help protect you against market volatility and make your insurances costs more predictable.
- Improved risk management strategy: When you transfer your risk to a captive, you protect your operating budget and provide a stable financing mechanism for selected risks.
In the next blog of this series, we will discuss questions to consider when determining if a captive program is right for your business. AssuredPartners NL offers a wide variety of construction services including captive insurance programs. To learn more, visit AssuredPartners NL Construction.Share This: