Based on your responses, your company appears to match the profile of other captive insurance company owners.
Choosing the right insurance strategy for your business—like any other major decision you face as a business owner—requires extensive research and analysis, more than a nine question assessment can provide. However, based on your responses, we can say that your company matches the profile of our clients who have seen success with captive insurance companies. Whichever route you eventually choose for your insurance coverage, you should, at a minimum, consider the opportunities provided by captive insurance.
So how do you get started? There are numerous steps involved in forming a captive insurance company, as well as in maintaining the company for as little or as long a time as you desire. Perhaps the most important step of all is teaming up with an experienced captive insurance advisor and provider. Properly arranged, you should only need to concentrate on what you do best: running your business.
Consider the three tips below from my book The Business Owner’s Definitive Guide to Captive Insurance Companies as a suggested first steps in the process of making an informed decision.
1. Research captive insurance service provider options
There are many service providers in the captive insurance industry. The industry has significantly matured over the past sixty years such that many service providers offer “turnkey” service packages in which the most critical functions of your captive insurance company are handled for you.
There are inherent dangers in engaging a “one-stop shop” service, and the scope of services provided and the fees these service providers charge for doing the work vary quite significantly. Therefore, it is critical that you do your due diligence to ensure that you are working with an experience captive insurance advisor and an experience service provider.
If a captive insurance company is a strategy you intend to pursue in the future, it will be well worth your time to have performed this research.
2. Have a professional perform a qualifying study
More to the point, I always recommend that business owners retain an independent, full credentialed underwriter and an independent, fully credentialed third-party actuary to examine their business. The underwriter’s primary objective is to evaluate the risk of your business and identify areas that should be insured. The actuary’s primary objective is to appropriately price the risk that will be considered for your captive to provide coverage for your underlying business.
This type of analysis should be done on an annual basis, as your business changes from year to year and the coverages and corresponding premiums that were appropriate for one year may not be applicable in the next.
3. Obtain a business plan
Certain types of captive of captive insurance companies require that a business plan be prepared prior to the company’s creation. Others do not. However, even if a business plan is not required, you should consider obtaining one.
This report should contain a complete perspective on all the operations of your potential captive, including proposed premium rates, capitalization, profits and losses, and even recommendations on the jurisdiction in which your captive should be established.
Want to Learn More?
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