Ask anyone that runs a business and they’ll tell you how important insurance is to their organization! The reason any company takes out an insurance policy is to mitigate potential risks.
For example, clients suing over contract disputes. Employees suing over workplace injuries. And members of the public suing because of injuries they sustained at your premises. Those are just some of the many risks insurance can handle for you.
Captive Insurance Companies
So, what happens when you run a large corporation? Well, you will still need to take out appropriate insurance policies for your business. But, did you know that self-insuring offers many financial benefits over taking out policies with third parties?
Captive insurance companies: in a nutshell
As you manage a large company, you’ve doubtless heard of “captive insurance” in the past. But, what does it mean, and can it benefit your firm?
Captive insurance refers to the process of setting up a company that purely provides insurance services to subsidiaries in a large group of businesses. As I’ve mentioned earlier, it’s a form of self-insurance.
Now, you might be wondering what the point is of underwriting insurance policies to yourself? Surely it would make more sense to pay a “proper” insurance company to do that for you? Well, it turns out that captive insurance makes plenty of financial sense.
It offers your subsidiaries a large pot of money
We all know that the point of insurance is to mitigate risk. There isn’t one business on the planet that has never faced the threat of legal action from a third party. If a company had to pay out large sums to settle legal disputes, it would soon find itself out of business.
Think of captive insurance as a large pot of money. Each one of your subsidiaries contributes their share to the pot. In the event that one of them faces financial trouble, that money can bail them out.
It lowers your tax liability
Recently I saw an interesting video on captive insurance over on at It said that out of the many benefits captive insurance offers; one is lowering tax liability!
As you can imagine, that’s a good thing by anyone’s book. As long as you seek advice on the best way to set yours up, your group of companies will pay less money to the IRS!
You can manage claims on your own terms
The thing about third-party insurance companies is that you have to agree to do things “their way.” In other words, you have little input over how any claims get handled. But, when you self-insure, you are in total control.
One of the downsides of using other insurance companies is how long it takes for claims to get dealt with and settled. With a captive insurance company, you can push for speedy resolutions. That means lower costs, and fewer people angry about the length of time a claim gets settled.
So, if you’ve got a large corporation, when will you be setting up a captive insurance company?

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