Captive insurance is the most formalized form of self-insurance. There’s nothing magical, mysterious or profound about it. It is a company formed to provide financial protection for a specified risk of loss. However, forming an insurance company does require a meticulous adherence to regulations, an in-depth knowledge of insurance contracts, a strict devotion to accounting, and a creative view of risk funding. For these reasons, you partner with a respected insurance management firm like Venture Captive Management (VCM).
3 Reasons to Choose Captive Insurance
The reasons for forming a captive insurance program are as varied as the number of entities to be insured, but primarily there are three factors that cause business owners to look to alternative risk funding:
- There is an exposure—risk of financial loss—that cannot be covered in the commercial insurance market either because the cost is prohibitive or coverage simply isn’t available.
- The coverage that is available from a commercial market is limited and only covers certain aspects of the exposure. For example, your business interruption policy does not cover technical disruptions from cyber-attacks. A premium and policy form can be developed for this coverage and premiums paid to your own insurance company.
- You manage your business carefully. You have documented policies and procedures in place and your losses have been insignificant. You’d like to self-insure a portion of that risk and just buy coverage for a catastrophic loss. Put that self-insured portion in your own captive insurance, realize a genuine business expense for the insurance expense, and grow your insurance business as a profit center.
No matter what your reason for forming a captive, the goal of the captive insurance company is to realize the underwriting profit from solid business management practices.
Why Choose Captive Insurance with Venture Captive Management
Captive insurance companies have been valuable financial tools for Fortune 500 companies for over 50 years. Their use in the “middle market” is tied to the overhead costs and regulatory requirements in the venue of domicile—the place where the captive is licensed as an insurance company. We have developed relationships in different venues specifically to serve companies that currently pay between $1 million and $20 million in applicable insurance premiums.
At VCM, we help you analyze your exposures, analyze your business’s financial structure for appropriate limits of coverage, develop the appropriate coverage, create your captive insurance structure, and manage your insurance business while you continue to operate your primary business—doing what you do best while creating an additional profit center.