Reasons for Setting up A Captive Insurance Firm


12 Jul

There is an emerging trend where owners set up an insurance company which offer insurance coverage to the mother company. There are firms which pay high premiums for different risks, yet they are entitled to a small amount of claim which makes them consider having their own insurance company to save on this cost. Investors have highly benefited from this arrangement.

There is an accumulation of money where the premiums are not remitted to a third party but to a subsidiary which means that any profit made belongs to the group. This favors the company where the premiums are paid but there are no claims that are made in regard to the subject insured. Captive insurance firms are able to work with the parent company to come up with the right amount of premiums.  This removes the aspect of being overcharged for the coverage.

Captive insurance allows the company to design a policy that meet the needs of the parent company.   This means that the company can obtain the insurance cover required even if the general insurance market does not have this cover. You will not have to go through a lot of strain before getting compensated when you have a captive insurance company. You can provide an insurance policy to your Atlanta investments abroad against risks that are not covered there.

It is easier and fast to complete the process of application of coverage. Senior executives do not spend a lot of cash trying to negotiate the policy as the company has set apparent guidelines. Information regarding any changes that happen to the Atlanta insurance cover is circulated with ease.

There is no guesswork when it comes to estimating the impact of risk when using this model. Traditional insurance puts a fixed charge on all the companies which may not be fair. Captive insurance helps to ensure that the right price is determined which is advantageous to the firm. There is stability in the premiums paid when using this model.

Parent companies put stringent safety procedures to guard against risks as lack of claims increase their profit margins. Companies do all they can to ensure that those risks which they can't handle are mitigated. The company can select the risks it can insure itself and allows others to be handled by a third party. Less claims from the captive firm translate to overall growth in the group. This is because the captive earns income on premium which accrues to the benefit of the parent company in the long run. You don't have to spend a lot of money and experience hassles when you want to reinsure your business as the captive insurance company will provide a direct link. When the captive investment has grown incredibly then the firm reduces the portfolio it has reinsured which makes it save a lot of money.

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