pros and cons of Captive!

Posted: Thu Jan 22, 2009 07:15 pm Post Subject:

Do you mean a captive agency where the agent only sells one carrier, or do you mean Captive insurance companies (Closely Held Insurance Companies) where an insurance company is set to insure its creator (such as the company that insures your UPS package is a captive owned by UPS)?

Posted: Thu Jan 22, 2009 10:07 pm Post Subject:

yes i mean Captive insurance companies (Closely Held Insurance Companies) where an insurance company is set to insure its creator
:)

Posted: Thu Jan 22, 2009 10:18 pm Post Subject:

Captives can get very complex but when used in the right situation is one of the most powerful and eloquent planning tools available. There is a lot to go over and may be too much for a thread. I would love to chat with you about them (im me) or if you have specific questions i will do my best here.

Posted: Fri Jan 23, 2009 05:43 am Post Subject:

Captive insurance company is about setting up your own small insurance company to fulfill the needs of your business. It would be a subsidiary of another insurance company. the advantage of starting a captive insurance company is that it would help you in saving taxes.

Secondly, you can customize the product to suit your needs. Moreover, every premium dollar that you earn after paying the claims would go into your book of profit.

The captive insurance company also helps the business houses to save towards the premium that it pays to the insurance company for the business insurance policies. Companies with lots of exposures specially benefit from this arrangement.

Posted: Fri Jan 23, 2009 10:25 am Post Subject:

It would be a subsidiary of another insurance company.

Posted: Fri Jan 23, 2009 12:38 pm Post Subject:

thank you all

i need to know the resons that makes some people are against captive insurance....

i mean the disadvantages of captive

Posted: Fri Jan 23, 2009 06:22 pm Post Subject:

People may be against captive insurance because the do not understand it. What you have to understand is that almost every fortune 500 company has one and that they are not some scam. The IRS has put safe harbors in the Internal revenue code for captives, but that does not mean that they are good for everyone. Here is a list of some pros and cons:

Cons:

High Cost: A captive is a true and functioning insurance company requiring actuaries, accountants, lawyers, Claims adjusters, Policy services, etc. Although you can create a captive on-shore (there are some states that have very favorable captives laws...such as Nevada) most are created off-shore (with all assets held ON-SHORE and filing US taxes...don't forget favorable taxation is one of the benefits of a captive). Creating and managing an offshore corporation has its own set of complexities and cost. All these reasons can attribute to the cost of running and creating a captive.

Pros:

Favorable tax treatment
Direct access to reinsurance markets
possible insurance savings
unique estate, business, and insurance planning (see the material I sent you)
can be run as a profit center for your business and generate significant income.


This is just off the top of my head....let me know if you need more.

Posted: Fri Jan 23, 2009 06:32 pm Post Subject:

this is exactly what i was looking for

thank you soooo much :)

Posted: Sun Feb 01, 2009 07:08 pm Post Subject: Hi

ki have a research paper about captive insurers too

it is tuff :(

Posted: Thu Dec 09, 2010 09:46 am Post Subject: Pros of captive insurance

Here are a few "Pros" that I came up with

Reduce Insurance Costs
Tax Befefits
Greater Control over Claims

Here is a good recourse for info on the topic --> captiveadvisors DOT com