Captive insurance is when insureds put their own capital at risk, create their own insurance company, and decide to work outside the market place in order to meet their own objectives and gain some stability, better coverage, or increased value for their existing coverage.
The Captive insurance industry is growing by the day as a good alternative to insurance plans, and yet very few people are aware of the truth behind it. What people are aware of about captive insurance is that it can be shrouded in myth and uncertainty, so here are some truths to cut through that shroud.
The first myth is that having a captive is better than using an insurance company, but a captive insurance company is an insurance company. It’s just owned by its insureds, and they get the profit of the company that would normally go to the insurance carrier.
They also get a bad rap because they are primarily located in offshore locations, but what people don’t realize is that these locations all have measures in place to support captive insurance. The United States didn’t have these methods until much later, and now that certain states are more supportive of captive legislation, more onshore locations will probably pop up.
Finally, captive insurance is all about control. Controlling costs and making it easier for people to save money in the long term. All the underwriting profits go back to the people, so while saving money up front is nice, there are several long-term benefits that come much later.
When it comes to choosing whether you or your company want to invest in captive insurance, it’s important to understand and then defeat the myths before making such an important decision. Then you can go into the choice with a complete understanding of the benefits.Read more