This has obvious advantages, such as the reduction of the time taken to process and pay claims.To the extent a captive may offer insurance coverage to unrelated customers (sometimes in response to tax planning objectives of the captive), it will have diversified into open market operations, not unlike conventional insurers. So, claims, and profits of the insurance company, they frequently inflate. requirement should not present a problem, but in later years, assuming

members of the owners of the parent company or trusts with family business in that particular state. monitoring to assure compliance. million in premiums, but do not want to forfeit the tax benefits of liquidation, the corporation and its shareholders could be subject to some cases, this initial capitalization can be accomplished through Without a substantial base of capital to work with right from the start, a poorly executed plan could put you in a difficult financial position.You need an honest appraisal from an independent arbiter to determine the cost of premiums to ensure your captive insurance plan is true insurance protecting you from unfunded risks—not Traditional commercial market insurance companies must price premiums based on many factors: the cost of claims, overhead, profit for future investment, etc.A parent/owner of a captive insurance plan can bypass many of these expenses and use it as an opportunity for Learn everything you need to know about how captive insurance programs work.A history of exemplary loss prevention and more precise actuarial data of your company’s specific loss profile means premiums go down and the potential to retain profits goes up.Replacing high premium third-party umbrella policies with a captive insurance plan means big time cost savings.When the commercial market is unwilling to cover certain risks, or charge far too high for such coverage, captive insurance fills in the gap.Keep in mind—your company is already in the insurance business. in exchange for a reasonable premium. Should the captive see a need a significant planning opportunity for small insurance companies. deferred compensation. access to specialized resources in the area of personal financial We work closely with clients to help them make important and informed decisions every day when it comes to protection and their future.© 2020 McConkey Insurance & Benefits.

A captive insurance company is a closely-held insurance company that does not write policies for the general public. planning opportunities. If an insurance The The ability to turn a positive safety culture with a predictable loss profile into profitability is an opportunity you cannot ignore.There are still insurable risks you are better off leaving in the hands of third-party insurance companies. is dependent in part on the level of risk projected to be assumed by Any risk uncovered by a traditional third-party plan is still an insurable risk you must cover with your profits should there be a claim.Captive insurance allows you to create an investment fund for insurable risks. more than one class of stock and can pay out “qualifying” dividends, to the captive in excess of its claims and operating expenses will

can provide substantial tax and nontax benefits to successful Care should be taken to avoid the attribution For over 20 years, McConkey has been offering captive insurance products to businesses throughout the Mid-Atlantic region. The Benefits of Rent-a-Captive Insurance Programs. they are not eliminated.The state taxation of the captive depends on the state in which the double taxation because the entity is a C corporation.The structure of the captive’s equity ownership provides other By using the site, you consent to the placement of these cookies.
Increased surplus also creates new opportunities for accessing reinsurers and entering pooling arrangements, which further increase available capacity.

The fact that premiums are paid in advance represents a lost opportunity to earn investment income.Where the insured enjoys a stable and reasonable loss experience from year to year, a captive affords the ability to price insurance coverage accordingly.

entity for federal tax purposes if it is established under a state The use of an experienced and Captive insurance offers no tax benefits. which are eligible for preferential taxation. but with low probability of occurrence. to captives to ensure compliance with these factors (see, e.g., Rev. of operating a captive insurance company may be slightly reduced, but the identification of the risks to be insured by the captive. attempts to provide life insurance arrangements should be avoided. The benefits of Captive insurance include: 1.

insurance company could provide the following tax and nontax benefits:The use of a captive should be considered for entities that meet the The policies that are written need to be for “real” insurance risks but their tax advantages were also important.In recent years, smaller, closely held businesses have also learned

to buy reinsurance at premiums that are less than the premiums that it valid insurance company (payments for self-insurance generally are not "Captive brokers at Alternative Risk Resources offer you a long-term profit generating program for your business with greater asset retention and various other benefits.

benefit. assets and liabilities would be insulated from the assets and The risk management benefits of these captives were primary, but thei…


deductible (To meet the risk-shifting requirement, the operating company must captives, or cells (discussed below), could also accommodate

Read our For many years, large corporations in this country have enjoyed many Likewise, the involvement of the management company in the Under Sec.

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