It’s no surprise that the captive insurance industry continues to grow and thrive. As we are preparing to attend the Captive Insurance Companies Association (CICA) conference next week, we have received a wave of invitations from actuaries, domiciles, claims administrators and a myriad of other industry service providers.
Captive insurance companies were first formed in the 1950s. By 1980, there were approximately 1,000 captive insurance companies. Today, there are just over 6,000 captive insurance companies and growing. When an industry achieves such steady growth, it’s worth pausing to contemplate the causes and reasons for the expansion of the industry. This is a particularly worthy exercise because many small and mid-size businesses have yet to take advantage of the many benefits afforded to them by owning their own insurance company. Four reasons are particularly noteworthy.
First, owning one or more captive insurance companies helps a business achieve a better risk management strategy. A captive insurance company gives owners, CFOs and risk managers greater flexibility. Also, owning a captive tends to drive greater awareness and focus on business risks. Hence, companies that are more conscious of their risk (both insured and uninsured) tend to do a better job insuring, addressing and even reducing risks because profitability of their captive insurance company is at stake.
Second, captive insurance companies are a remarkable financial vehicle. Their capabilities and benefits go beyond insuring the risks of the parent company. Captives receive many of the same regulatory, financial and tax treatments that large insurers enjoy.
Third, the proliferation of competing domiciles since 1980 has made owning your own insurance even more accessible. Captives have become increasingly affordable as more and more states have enacted legislation to domicile captive insurance companies.
Fourth, almost sixty years of favorable legislation (both federal and states) and case law have strengthened the foundation and confidence of the industry. Captive laws and regulations are well established.
CIC Services, LLC has been helping small businesses own their own insurance companies for seven years. It is very gratifying to help small businesses strengthen their financial position.
Call us to discuss whether or not a captive insurance company or additional captive insurance company is the right move for your business.