Why Form a Captive Insurance Company?

RMC Group is a leader in risk management.  One strategy, which we offer, is the management of captive insurance companies. We have helped many businesses form a captive insurance company and have helped them achieve significant benefits.  A captive insurance company is an excellent risk management tool.  In addition, it can be a profitable business and can offer significant benefits to the owner(s) and insured(s). Below are some of the benefits a business might realize by including a captive insurance company in its risk management strategy.

Coverage Control – A captive insurance company enables a business to better manage insurance risk.  By forming a captive, the business establishes underwriting guidelines, determines premiums, writes the insurance contracts and controls the settlement of claims.  In addition, the business is able to tailor coverage to the insurance risks that are specific to the business.  The business is not limited to coverages that a commercial insurer is willing to offer.

Uninsurable Risks – A captive insurance company can provide coverage for insurance risks that are unavailable or prohibitively expensive in the commercial market.

Cost Reduction – A captive insurance company can reduce insurance expenses by eliminating such commercial insurance company costs as commissions, overhead expenses and profits.

Underwriting Profits – A captive insurance company can be a source of profit.  Premiums paid to the captive in excess of the claims paid by the captive are retained by the captive as net profit, instead of going to an unrelated commercial insurance company.

Rate Control – A captive insurance company provides greater control over a business’s insurance costs.  Premiums paid to a captive are based on the claims experience of the associated business.  In contrast, premiums paid to a commercial insurance company are based on the aggregated claims experience of unrelated businesses, some of which may have poor claims experience.  In other words, when a business pays insurance premiums to a commercial insurance company, it is often subsidizing the insurance costs of unrelated businesses.

Reinsurance Access – A captive insurance company can provide access to the reinsurance market, which may result in better coverage at a lower cost, when compared to the commercial insurance market.

Investment Income – By forming a captive insurance company, a business can control the investment of unearned premiums and reserves, instead of paying these amounts to an unrelated commercial insurance company.

Claims Control – By forming a captive insurance company, a business gains control over the claims adjudication and payment process, which can result in a more efficient and expeditious process.

For more information on how to get a captive started or other risk management strategies, contact RMC Group at 239.298.8210 or [email protected].