At first glance, creating a captive insurance company which is wholly owned by its insureds may appear attractive because it allows companies to have more control over how they are insured. However a closer examination of captive insurance companies can reveal that they may not be the best solution for you.
First, there is a significant barrier to entry in establishing a captive insurance company since it requires raising a large sum of initial capital to guarantee the captive insurance company remains financially sound even in periods of market turbulence. Next, establishing a captive insurance company will add administrative costs to your operation with a need for new employees that have the required skillsets. Also, captive insurance companies tend to be small and by definition self-insured, so risk cannot be spread out and often requires reinsurance. There will also be a dependency on third party service providers which vary in quality. In addition, the Internal Revenue Service has been changing tax policies that have reduced the long time tax benefits enjoyed by captive owners. After reviewing just a few of the implications of establishing and operating a captive insurance company, you should consider a partnership with an experienced and high performing insurance carrier like Prime Insurance Company as alternative.
For over 20 years, Prime Insurance Company has delivered customized insurance solutions, extraordinary claims results and risk management partnerships for thousands of insureds. Prime Insurance Company has the required industry knowledge and in-house organizational capacity to consistently provide superior insurance solutions.
In conclusion, the large startup expenses, additional long term administrative costs, decline of tax incentives and dependence on third parties means establishing a captive insurance company will come with a high cost but not necessarily better results. In contrast, a partnership with Prime Insurance Company will deliver better insurance solutions without the burdens and costs of establishing and maintaining a captive insurance company.
Please contact me to learn more about what Prime Insurance Company can do for you!