Benefits of Captive
FINANCIAL BENEFITS
-Cost Savings on Premiums - Instead of paying high premiums to commercial insurers (with profit margins and overhead baked in), the parent company can potentially reduce costs by insuring through its captive.
-Investment Income – Premiums paid to the captive are invested, and the business can benefit from the returns on that invested capital.
-Improved Cash Flow – Premiums are retained within the corporate group, rather than paid out to third-party insurers.
-Tax Advantages – Captives qualify for favorable tax treatment (i.e. deductibility of premiums, ability to accumulate reserves).
RISK MANAGEMENT BENEFITS
-Customized Coverage – Captives can design policies
tailored to unique or hard-to-insure risks that the commercial market may exclude or charge excessive rates for.
-Stability in Pricing – Businesses are less exposed to the volatility of the insurance market cycle (hard vs. soft markets).
-Access to Reinsurance – Captives can often buy reinsurance directly, sometimes at more favorable terms than going through a traditional insurer.
STRATEGIC/OPERATIONAL BENEFITS
-Data & Loss Control – A captive encourages the parent company to track claims and loss patterns more closely, leading to better risk management and safety improvements.
-Profit Center – Instead of paying outside insurers, the business keeps underwriting profits (if claims are lower than expected).
-Flexibility – Captives can be structured to cover emerging risks (cyber, supply chain disruptions, reputational damage) that may not be fully addressed by the commercial market.
-Employee Benefits Funding – Some captives are used to fund employee benefits (health, disability, life insurance), often at lower cost and with greater control.
OTHER ADVANTAGES
-Negotiation Leverage – Having a captive can strengthen a company’s position when negotiating with commercial insurers.
-Global Risk Management – For multinational companies, captives provide a centralized way to manage worldwide risks.
-Wealth Accumulation – Over time, the captive can build up surplus capital, effectively creating an additional asset for the parent company.
CONTACT INFORMATION
Garett Yurk - Agency Operations Manager
garett.yurk@nebraskaownersins.com
(402) 705-3509
Ted Lung - Sr. VP of Sales
ted.lung@nebraskaownersins.com
(402) 434-3990
IN A NUTSHELL…
· Cost Control and Savings – Retain underwriting profits, reduce reliance on commercial insurers, and potentially lower premium costs.
· Customized Coverage – Design insurance tailored to unique or hard-to-insure risks that the traditional market may not cover.
· Improved Risk Management – Gain better data on losses, incentivize safety measures, and stabilize pricing over time.
· Financial Advantages – Build reserves, earn investment income on premiums, and access favorable tax or reinsurance opportunities.