Understanding Wealth® Blog

Forming and Benefitting from a Captive Insurance Company

Captive insurance companies (captives) are established to insure enterprise risk in a cost effective manner that may not be readily available from traditional insurance carriers.

Creating and owning a captive insurance company(ies) brings many benefits to your business:

  • Lowers Insurance Costs: This is achieved through no profit loading, elimination or reduction of broker commissions and lower administration costs versus outside vendors.
  • Improved Cash Flow: Commercial insurers rely on investment and underwriting profit to improve cash flow. Premiums are typically paid in advance while claims are paid out over a longer period of time. With your captive insurance company, premiums and investment income are retained within the captives. Captives can provide a flexible premium payment plan thereby offering a direct cash flow advantage to the insured organization. Cash for unpaid claims create cash surplus inside the captive insurance company.
  • Risk Retention: With a captive insurance company, your firm can manage its own risk by increasing your commercially purchased deductible levels and insuring the difference through your captive(s).
  • Risk Management: Captives can act as a focus for risk management and risk containment activities of its parent organization.
  • Access to the Reinsurance Market: Captives can access the reinsurance market which operates on lower cost structure than a direct commercial insurer.
  • Control: Control of underwriting, premium rates, and forms, as well as control of claim settlements and captive investment portfolio.
  • Flexibility: Captives can have specifically tailored wordings in the structure of the policies.
  • Coverage Provisions: Captives can provide risk coverage to subsidiaries and members that may not be readily available in the open market.
  • Tax Advantages: 831(b) captive insurance companies are not taxed on annual premiums up to $2.2 million in annual premiums.

Captives versus Retail Insurance Carriers
A captive insurance company is one that insures the enterprise risks of its parent company(ies). Here are a few of the compelling reasons why you may want your own captive(s) to cover enterprise risks of your company:

Business Planning Group has already helped dozens of Utah firms to establish their own captive insurance companies and we look forward to discussing how a captive insurance company may benefit you and your organization.

Share this Information


This Website is for informational purposes only and does not constitute a complete description of our services or product offerings. This website is in no way a solicitation or an offer to sell securities, investment advisory services, annuities, qualified plans, non-qualified plans or insurance except, where applicable, in states where we are licensed and registered. Information throughout this site, whether statements regarding products or services, taxes, the market or other financial information, is obtained from sources which we and our suppliers believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Nothing in this website should be interpreted to state or imply that past results of any investment or policy are an indication of future performance. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness, or for any delay or interruption in the transmission thereof to the user. THERE ARE NO WARRANTIES EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION POSTED ON THIS OR ANY "LINKED WEBSITE." "Understanding Wealth", "Executive Wealth Builder" and "Final Gift" are registered trademarks of Business Planning Group.