A captive insurance company is a company that is formed and owned by a non-insurance company to insure the risks of its owners. It is essentially a form of self-insurance that is established to meet the risk-management needs of its owners. Captives can be used by anybody from large multinational corporations to smaller nonprofits. They can be a bit riskier than other forms of insurance since the owners are essentially protecting themselves from any kind of damage, but they do operate just like any other insurance company once they are established.
Captive insurance companies are more common than many people realize, and they do have several advantages for those who use them instead of traditional insurance companies. Here are just a few to keep in mind.
Improved Cash Flow
Since a captive insurance company works the same way as any other insurance company, you will have to make premium payments. The good news is that since you have formed the captive in the first place, you can schedule your payments and make them as convenient for you as possible. This will help improve your cash flow while still keeping yourself insured at all times.
Better Access to Reinsurance
Reinsurance is always tricky for businesses. In fact, there are many cases when it isn’t an option. With a captive insurance company, you will have direct access to the reinsurance market since the expense ratios are not as high as they are with commercial insurers.
A Policy that Suits Your Needs
Since you own a captive insurance company, you have greater flexibility when you create a policy. This allows you to create a policy that is tailored to your business’s needs.
A Greater Control Over Claims
Since you own a captive insurance company and you can create your own policies, you have a far greater control over claims that are made than you would if you had a policy from a commercial insurance company. You can be more proactive when it comes to risk control, and you can essentially stop frivolous claims that frequently cause problems with commercial insurance companies.
As you can see, there are some good reasons to go with a captive insurance company when you need to suit your business’s insurance needs. If you would like to learn more about captive insurance, contact one of the many captive insurance services that work closely with small businesses near you.