Wholly-Owned Captives

If your company is looking to lower insurance costs and gain more control of your insurance program, captives are an excellent alternative to traditional commercial insurance. Perhaps the most common type of captive is known as a “wholly-owned captive” or “pure captive.”

Defining “Captive”

A captive is an insurance company created and wholly owned by one or more non-insurance companies to insure the risks of its owner (or owners). Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured.

This arrangement allows your business to pay tax deductible premiums to the captive in exchange for insurance coverage and earn interest on the captive’s investments in the form of a dividend. As long as the captive complies with certain Internal Revenue Service regulations, the premiums it receives are tax free, and it will owe income tax only on its investment earnings.

Pure Captives

In the case of a wholly-owned or pure captive, your business and its subsidiaries are the only companies insured by the captive in question. In such cases, your company has complete control over all of the captive’s activity, earnings and losses. This is in contrast to other types of captives, such as rent-a-captives, which are typically owned by more than one business.

Forming a Captive

Although forming a captive insurance company can be beneficial in many cases, it isn’t right for every business. Here at the Warren G. Bender Co., we understand all of the risks, benefits and regulations surrounding the formation and use of captives in business. We can analyze your current coverage situation, review the specifics of your business and provide you with valuable advice regarding the formation of a captive. If you ultimately decide that this strategy is right for you, we can also help you implement it successfully.

The Warren G. Bender Co. has more than 75 years of experience in the insurance industry, and we know how to help you get the most possible benefit for your money. Contact us today to discuss your needs.