Top Benefits of Captive Insurance
There is an emerging trend where owners set up an insurance company which offer insurance coverage to the mother company. Companies which pay higher premium and claim less are having this kind of an insurance plan. This investment is known to bear fruits.
There is an accumulation of money where the premiums are not remitted to a third party but to a subsidiary which means that any profit made belongs to the group. Most of the firms pay premium, and no risks happen. You can determine the right price for the premium because you know the exact risks you are facing. It is important in ensuring that there is predictability in pricing and the costs of obtaining an insurance cover.
This kind of insurance enables the firm to have an insurance cover which is customized to the parent company. There are certain risks which are new or are not insured by many companies and thus the captive insurance can provide this coverage. Companies are assured of compensation when there is an occurrence of risk. You can provide an insurance policy to your investments abroad against risks that are not covered there.
There are no bureaucracies involved when getting an insurance cover from a captive company. There is less time consumed by top managers discussing the coverage. Availability of integrated systems within the company ensures that there is proper communication with the departments concerned and thus information about any changes in the policy flows smoothly within the organization.
Where you have captive insurance the extent of risk is known. Traditional insurance puts a fixed charge on all the companies which may not be fair. Setting an overall price does not consider firms which have a strict risk management system thus the premium price tends to be unfair. There is stability in the premiums paid when using this model.
The company can identify the risks and take the necessary steps to reduce the possibility of their occurrence. Though some risks cannot be prevented, others can be managed by ensuring that care is taken. The company can select the risks it can insure itself and allows others to be handled by a third party. Proper management of risks ensures that the captive firm grows in revenue which is reflected in the parent company. This is because the captive earns income on premium which accrues to the benefit of the parent company in the long run. There is direct access to the reinsurance company. When the company has grown, it has a surplus which makes it rely less on reinsurance as it capable of handling the risks.