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Increase in manufacturing companies pursuing captives, says CIC Services
February 3 2021

Increase in manufacturing companies pursuing captives, says CIC Services

Randy Sadler Recent Headlines

There has been an increase in manufacturing companies pursuing captive insurance as a solution to the insurance conundrum, according to Randy Sadler, a principal with CIC Services.

CIC Services outlines that 2020 was an unprecedented time for manufacturing as the COVID-19 pandemic disrupted operations on a “massive scale with severe financial consequences.”

A survey by the National Association of Manufacturers (NAM) found that 80 percent of manufacturers expect the pandemic will have a financial impact on their business.

In addition, the RSM US Middle Market Business Index, a measure of business sentiment across mid-sized US companies, suggests that more than 60 percent of manufacturers expect problems to continue.

Notably, major US manufacturers have said some of their closed plants may never reopen.

However, many industries, including manufacturing, are planning to utilise captive insurance companies, and that trend has not subsided, according to the 2015 Global Risk Management Survey.

CIC Services explains that in this time of uncertainty and threats from multiple angles, “manufacturers need a robust approach to risk management that addresses the potential for risks and not only provides mitigation but serves as a solid financial strategy to weather the storm.”

The captive insurance management firm notes that Insuring against risks provides protection, but third-party commercial insurance policies aren’t always enough.

Sadler states: “Businesses need to review their insurance policies to identify gaps in coverage and to fill these gaps, captives can replace commercial insurance, insure enterprise risks, insure warranties, insure bonds, insure employee benefits or healthcare or any combination of these.”

Read the full article on Captive Insurance Times.

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9721 Cogdill Road, Suite 202
Knoxville, TN 37932
Phone: 865.248.3044
Fax: 865.966.1199

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Stronger Business Model

Businesses who implement ERM programs combined with a captive to plan for unforseen risks stand a better chance of surviving, and passing to the next generation.

Improved Cost Controls

Captive owners can leverage their ERM and captive programs to improve their negotiating ability when renewing their commercial insurance coverages.

Wealth Accumulation

Profitable captives will see their reserves grow over time to significant sums which can be utilized by their owners for retirement or other life cycle needs.

Advantageous Tax Treatment

Insurance companies are the only entities allowed to expense projected future expense against current-year revenues (claim reserves). Small captives (premiums of $2.2M or less per year) may also elect to only be taxed on their investment income, potentially resulting in substantial tax savings for their owners.

Insurance Profits

Utilizing your captive to reduce or replace your commercial insurance coverage with policies issued by your captive allows you to capture insurance profits previously realized by the carriers.

Improved Risk Management

Adding a captive and ERM program will result in a higher awareness and enhanced strategies for how your organization thinks about and plans for all risks.

Asset Protection

The assets held by a properly organized and managed captive enjoy a very high degree of protection from both the business’ and business owner’s creditors.