What |s a capt|ve |nsurance company?

Cne of Lhe blggesL challenges faclng buslnesses Loday ls rlsk managemenL A Lool LhaL rlsk managers
need Lo conslder ls a capLlve lnsurance company

1he beneflL of a capLlve lnsurance ls LhaL lL allows a company Lo manage rlsk lLself raLher Lhan depend
on a commerclal carrler SLandard rlsk managemenL pollcles such as producL and properLy llablllLy
coverage may noL cover hldden rlsks such as loss of a key cusLomer suppller or daLa LhefL or forgery by
an employee or breach of daLa among oLhers

Cnce formed Lhe capLlve lnsurance company funcLlons Lhe same as a LradlLlonal lnsurance carrler
lssulng a pollcy and recelvlng premlum paymenLs from lLs parenL company

What |s a capt|ve |nsurance company? A capLlve lnsurance company ls a subsldlary company creaLed Lo
serve as an lnsurance carrler for Lhe parenL company ln essence lL ls a way for Lhe parenL company Lo
become selflnsured

What are the benef|ts of creat|ng a capt|ve |nsurance company?
1he prlmary beneflL of a capLlve lnsurance company ls Lo guaranLee LhaL Lhe Lype of rlsk managemenL
coverage needed by Lhe parenL company ls avallable lL avolds Lhe posslblllLy LhaL a commerclal lnsurer
may wlLhdraw from Lhe markeL leavlng no coverage avallable

CLher beneflLs lnclude
*1he parenL company ls able Lo conLrol Lhe cosL of lLs lnsurance premlums

*1here ls no auLomaLlc lncrease ln premlums as ls ofLen Lhe case wlLh a commerclal carrler so lL
sLablllzes Lhe lnsurance budgeL of Lhe parenL company

*remlum paymenLs are a Lax deducLlon for Lhe parenL company buL are noL Laxable Lo Lhe capLlve

*1he capLlve lnsurance can relnvesL Lhe premlums collecLed under guldellnes LhaL are broad and
flexlble

*1he parenL company can lnsure all or some of lLs rlsk wlLh Lhe capLlve

now do you determ|ne whether a capt|ve |nsurance company |s the r|ght strategy
1here are no speclflc crlLerla Lo deLermlne wheLher a company should creaLe a capLlve lnsurance
company buL Lhere are some guldellnes

Cood candldaLes for creaLlng a capLlve lnsurance lnclude

*A buslness LhaL has subsLanLlal selflnsured or unlnsured buslness rlsk 1he greaLer Lhe rlsk Lhe more
lmporLanL coverage becomes

*A company LhaL has slgnlflcanL LhlrdparLy lnsurance expense aylng premlums Lo a subsldlary ls a way
Lo reLaln Lhe wealLh of Lhe parenL company when no clalms are submlLLed

*A company LhaL has a good hlsLorlcal loss record Coverage Lhrough a LhlrdparLy carrler ls sub[ecL Lo
annual premlum lncreases regardless of a company's clalm record

*A company ln an lndusLry LhaL has llLLle or no LhlrdparLy lnsurance avallable for LhaL lndusLry A capLlve
lnsurance company guaranLees coverage ls avallable

*A company LhaL has more Lhan 23 employees 1he more employees a company has Lhe greaLer Lhe
chance for employee crlmes Lo occur

1here ls a falr amounL of lnformaLlon found on Lhe lnLerneL concernlng Lhe feaLures beneflLs and
loglsLlcs of formlng fundlng and operaLlng a capLlve lnsurance company 1hls ls due ln large parL Lo Lhe
need for lnLeresLed parLles Lo asslmllaLe large bodles of lnformaLlon qulckly and mulLlmedla (such as
vldeo) helps meeL LhaL need

lor What |s capt|ve |nsurance and genulne What |s capt|ve |nsurance company you can vlslL our
webslLe
WebslLe hLLp//whaLlsacapLlvelnsurancecompanycom/