Captivating Thinking

It seems a day doesn’t go by when I hear a business owner say “I’m not doing anything until after the election.”

This indecision certainly makes sense on many fronts, particularly when considering questions like:

• “Should I hire right now?”
• “Should I modernize equipment?”
• “Should I invest in advertising or wait?”
• “Should I buy out a business competitor who is ready to sell?”
• “Should I take on an additional partner?”
• “Should I add a new store or make a real estate investment?

One of the benefits of owning a captive insurance company is that it provides a wildly efficient vehicle to fund a buy-out agreement among business owners.  Before discussing this unique benefit, let’s review the primary reasons that businesses form their own insurance company – specifically a captive insurance company.

1. To manage business risk by formally self-insuring certain risks with pre-tax dollars
2. To protect assets from creditors of the operating business and its owners or other risks
3. To realize profits and accumulate wealth inside of a separate business entity

The great State of Tennessee has significant growth ambitions for the captive insurance industry in the state.  Since revamping its captive insurance laws in the Summer of 2011, the state has added 10 new captive insurance companies.  Governor Bill Haslam spoke at the Tennessee Captive Insurance Association (TCIA) conference in Nashville, Tennessee on Wednesday, December 4, and he said he has given the Department of Commerce and Insurance the goal of 30 captives domiciled in Tennessee by the end of 2013.

For any captive to be successful, it must do three things well: (1) operate as an independent and legitimate business, (2) manage its costs (including claims), and (3) manage its assets effectively. CIC Services is here to help with all three of these things, and going forward we’ll be sending you periodic updates, like this one, describing how we do so.