Benefits of a Captive

There are many reasons for forming a SBU - from filling gaps in insurance coverage to reducing costs to transferring wealth to the next generation of owners.

Enhance Estate Planning, Asset Protection and Business Succession
SBUs provide attractive options for business owners with estate planning objectives; allowing the opportunity to transfer capital and value to the next generation of owners through sequestering of assets in SBU trusts. Generally, the assets of the Captive will not be subject to claims of creditors of the insured companies or their owners under general corporate law.
Certain tax benefits may be available by using a SBU. For example, premiums paid to the captive generally are a deductible business expense to the company that formed it accelerating the deduction of future losses.
Premiums Less Than $2.2 Million - The Internal Revenue Code allows for an election to exclude underwriting income from the regular corporate income tax for property and casualty insurance companies or associations where annual premiums do not exceed $2.2 million. Or more clearly stated, allows for an election to be taxed at regular corporate rates on taxable investment income only instead of underwriting and investment income.
Reduced Costs
Although an SBU is not a replacement for your existing property and casualty insurance, you may be able to reduce the costs of a conventional insurance company’s expenses, markups and profits by establishing an SBU, as the costs and profits remain in your control.
Improved Cash Flow
An SBU allows you to control the investment portfolio funded by insurance premiums. It also allows the money typically paid to third-party insurers to be recaptured by your business, unless claims are paid.
An SBU gives you more control over your financial projections and planning because it is less vulnerable to the erratic, cyclical nature of the conventional insurance market.
Improved Risk Management and Profitability
An SBU can provide great incentives to improve the risk management philosophy throughout your organization. Conventional insurance is typically provided on a guaranteed cost basis and there is little incentive to improve risk management, as there is no participation in the profitability of the insurance program. However, with a Captive, you benefit from good claims experience, and surplus profit can be used to pay claims, invest or distribute to the shareholder by way of qualified future dividends.
Expanded Coverage
SBUs can provide coverage that is often unavailable or cost-prohibitive to obtain from conventional insurance companies. This broader coverage is available for such things as historic loss experience for a sector or industry, deductible reimbursement, administrative/regulatory acts, construction defect, earthquake, wind, weather, mold, product liability, employment practices, product warranty, subsidence, wrongful acts, professional liability and litigation defense.


Learn More
Call CCS at 412-837-1500.

©2013 The Complete Captive Solution, LLC, All Rights Reserved website design: The Karol Company