Understanding Captive Insurance Companies Series – Part 1 of 3: Benefits

Construction 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:

  1. Flexibility in policy design and coverage, premium payment timing and claims handling
  2. Coverage for unique or specific risks that would not otherwise be transferable in the traditional market
  3. Customized coverage specific to your particular business, as well as non-traditional coverage
  4. Greater Control giving you the power to coordinate and improve your risk management program, turning it into a viable profit center for your business.
  5. 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.
  6. 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.
  7. 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.

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