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The standard market incurs many expenses
not related to individual clients, it is inefficient and the
buyers have to pay for that inefficiency. Captive Companies have
a lower operating cost (“expense ratio”).
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The standard market automatically
retains investment income on what is essentially their
policyholder’s money. Captive owners hold their own loss funds
and premiums on which they earn investment income.
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The standard market is subject to
insurance cycles, alternating between artificially low and
excessive premiums, when the basic purpose of the industry is to
stabilize costs. Captive owners fund their own predictable
losses while reinsuring catastrophic exposures. Premiums can be
stabilized through loss control.
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The standard market selects only those
classes of risk that conform to its “standards”. Captive owners
decide which risks are acceptable and evaluate prospective
members.
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The standard market avoids providing
individual services on a fee basis. Captive owners decide which
services will be purchased promoting cost effectiveness.
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The standard market will not provide a
long term deal to a corporation wherein the parties agree on the
after-tax, after-investment cost to the insurer of providing its
service plus a reasonable profit. Captive owners negotiate fees
in advance with the fronting insurance company for selected
services and guide their own tax and investment programs.
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Greater control of your insurance budget
through premium stabilization and predicability. Reduction of insurance premiums
through lower operating costs than a commercial insurance carrier.
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Loss control efforts directly result in
premium savings since each Captive owner primarily funds for
their
own predictable losses while sharing operating costs.
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Greater coverage than that available
through the traditional insurance marketplace. Coverage can be
tailored to the needs of Captive owners.
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Better control of each owner’s risk
management destiny.
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Each Captive owner becomes a Director of
the Company allowing for maximum input into the insurance company's
operation. Owners have the ability to select service providers
on an unbundled basis creating the opportunity for cost
effective and efficient services.
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Greater control of claims adjudication.
Owners have direct access to and notification from the person
setting loss reserves, input into legal counsel, and the ability
to designate claims that require special attention by the
adjuster.
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Investment income from each owner’s
distinct loss fund and potential profits accrue directly to that
owner’s bottom line.
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Improved cash flow through reduction of
operating costs and the disbursement of dollars from each owner’s
loss fund only after a loss is settled versus the time a loss is
reserved.
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Security and protection through the
utilization of an “A” rated policy issuance company that is
licensed in all states as well as the transfer of all
catastrophic loss potentials to a “A” rated reinsurance
company.
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