Benefits of Rent a Captive Insurance

The desire for alternate risk financing has led to the creation of captive insurance. Captives are privately owned by businesses that front capital to protect themselves against loss. If an organization needs the flexibility of alternate coverage but cannot afford the expense of set-up and operation, rent a captive could be a viable option.

 

Structure of Coverage

 

The owners of a captive determine the structure of coverage, and can tailor it to specific needs. Premiums are invested for the benefit of the participants, providing capital gains for the members. Groups have access to reinsurance, and tax breaks are available for certain configurations. The result is more complete protection at a lower cost.

 

Renters in captives share in the advantages of individually structured insurance. It is especially helpful if they have been paying hefty premiums for policies that fall short of handling their particular requirements. More control allows coverage of uncommon or unusually high risks.

 

Risk Management Incentives

 

Instead of basing coverage on reported events in general, captive insurance addresses individual exposures and funds them in advance. Economic advantages of this system depend upon low frequency of claims. Participants in the group benefit from the members’ active measures to reduce incidents, as the results directly affect cash flow.

 

Alternative Solution

 

For a company with high insurance costs and limited capital, the alternative risk funding of rent a captive may be an optimal solution.

 

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Avoid the High Costs of Forming a Captive

Rent A CaptiveMany people bemoan the practices of the financial community and the effect it has had on the economy. However, regulating business has always been a difficult and complicated affair. One of the effective methods employed in sound financial practice is the regulation of insurance agencies. Companies may not be able to rely completely on the performance of a particular company, but they are more able to rely on the backup of their insurance. The government ensures this by enacting strict requirements on the capital funds available to insurance companies. This includes captive insurance companies, which are formed for the sole purpose of ensuring their parent company. However, many companies who would otherwise use captive insurance to offset their business risks cannot assemble the required capital to form a captive insurance company that will meet government standards. For these companies, rent a captive can be the solution.

 

Insurance brokers can match an existing captive with a potential client. Often, the captive parent is in an industry similar to that of the rental clients. In this way, the captive is tailored to the clients, who share similar risk profiles. These clients become part of a collective that benefit from the captive insurance without having to deal with the massive setup costs. For some specialty companies that cannot take advantage of traditional insurance, rent a captive is the best alternative to meet their risk requirements without breaking the budget.