Captives

ECONOMIC BENEFITS

Premium Retention

By creating your own insurance company, you retain the insurance premiums, net of any losses and claims, you would otherwise pay to your current insurance providers. These retained premiums are invested, and your captive can use these premiums for many purposes: covering future losses, paying dividends, making loans to your operating business, etc.

Tax Benefits

Captive insurance companies provide businesses with attractive tax benefits. The premiums paid to the captive insurance company are tax-deductible to your operating business, and compound in value in a tax-deferred manner at the corporate tax rate, which is likely lower than what you’re likely paying now.

Insurance Benefits

Tailored Coverage

Captive insurance allows businesses to tailor their coverage to meet their unique needs. They can choose the type and level of coverage that best suits their business, rather than being limited to the options provided by traditional insurance providers.

Financing Benefits

Your business can lower its borrowing and financing costs and hassles by lending itself money out of your captive insurance company.

Insurance Benefits

Your captive insurance company can be structured to suit your company’s specific needs in ways that can: lower overall insurance costs, tailor coverages, and provide coverages that may not exist in the commercial market.

FINANCING BENEFITS

Your captive insurance company can make loans to your business up to 45% of the captive’s liquid assets. The parent company can use these funds for various purposes, such as working capital, acquisitions, capital expenditures, or debt refinancing.

You Control the Financing

By lending from your captive insurance company, you take control over your financing options. You access funds on your terms, without dealing with external lenders.

Tax Benefits

The interest payments are income for your captive insurance while being a tax deduction for your operating business. Your captive will likely pay a lower tax rate, providing you with overall tax savings.

Risk Management and Financing Integration

Lending from your captive insurance company allows your parent company to integrate its risk management and financing strategies. You have control of both.

Advantages

  • Short underwriting timeframe: couple weeks or less.
  • Tax advantages:
    • Your captive insurance company keeps all the interest income.
    • Your captive pays 21% corporate tax rate on the interest income.

Disadvantages

  • Need to provide sensitive information.
  • Long underwriting timeframes.
  • Uncertainty of approval.
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