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Happy Thanksgiving!  Thanksgiving is often a time to enjoy our friends and families, and – dare I say – our heirs.  Speaking of heirs, another fabulous benefit of a captive insurance company is that it provides a very efficient vehicle for the transfer of wealth to one’s heirs.  But, before discussing this unique benefit, it’s worthwhile to 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

News reports about the looming “fiscal cliff” scheduled to take effect on January 1, 2013 have been downright exhausting.  The “fiscal cliff” is a term that describes the severely negative economic impact that will occur at the outset of 2013 as two self-imposed government deadlines converge.  The first deadline is the expiration of the Bush tax cuts, which transferred a significant amount of money to the private sector.  The second is automatic federal spending cuts that occur as a result of the debt ceiling agreement reached in the Summer of 2010 between Democrats and Republicans.  Most economists predict that going over the fiscal cliff will plunge the lethargic U.S. economy into another deep recession.  In a sense, our politicians set-up a future “gun-to-the-head” scenario.

This is our second letter about the Captive Live Conference in Chicago, Illinois.  CIC Services, LLC recently attended the conference as part of our on-going efforts to stay abreast of shifting trends, strategies and regulations in the captive insurance industry.  At this conference, we had the pleasure of listening to Patrick Raftery, Chief of Risk Management at Walgreens.

Very often, businesses owners increase their success, profitability and asset protection by starting or acquiring a second business that serves their primary business.  This is often described as vertical integration, and it is often effective because a supplier or service provider is already making a profit serving the parent company.