Top Benefits of Captive Insurance
There is an emerging trend where owners set up an insurance company which offer insurance coverage to the mother company. There are firms which pay high premiums for different risks, yet they are entitled to a small amount of claim which makes them consider having their own insurance company to save on this cost. There are many benefits that arise from investment.
There is an accumulation of money where the premiums are not remitted to a third party but to a subsidiary which means that any profit made belongs to the group. This is a beneficial investment in a case whereby the premiums are paid but no loss occurs, and thus the money is retained within the group. You can determine the right price for the premium because you know the exact risks you are facing. This removes the aspect of being overcharged for the coverage.
You don’t have to take a general cover when you have a captive insurance subsidiary. There are certain risks which are new or are not insured by many companies and thus the captive insurance can provide this coverage. Customizing the services of the insurance company to meet the parent company is very important because the firm is assured of compensation if a risk happens. Offshore companies can receive the cover that is not available in the traditional market.
It is easier and fast to complete the process of application of coverage. There is less time consumed by top managers discussing the coverage. Information regarding any changes that happen to the insurance cover is circulated with ease.
Captive insurance companies know the full extent of the risks exposed to their parent companies. Convectional insurance model operates by various firms with different risk exposure pooling together, and thus there is a set amount of money for a specific risk which may not be correct. This standard price may not be the correct amount that should be paid. There is stability in the premiums paid when using this model.
Internal risk management is robust as the firm would not want to have any claims lodged. Some risks like natural disasters cannot be avoided while others can be prevented by taking a right precautionary measures. Companies need to evaluate the risks which can be handled by a captive company and those that need to be handled by traditional insurance companies. Proper management of risks ensures that the captive firm grows in revenue which is reflected in the parent company. Captive insurance firms revenues always reflect on the mother company. You don’t have to spend a lot of money and experience hassles when you want to reinsure your business as the captive insurance company will provide a direct link. When the company has grown, it has a surplus which makes it rely less on reinsurance as it capable of handling the risks.