AIG. Liberty Mutual.Travelers. Farmers...
Conventional insurance is offered by some well-known companies, but as anyone who’s been denied a claim will tell you, exclusions found within conventional policies could thwart even the most well-intentioned insurance efforts of a business owner. Enter captive insurance, a sophisticated business and insurance planning tool that will cover a business's losses specifically for its affiliated company. Owning your own insurance company (or appointing someone else to be the owner) can fill gaps in coverage and provide many other business-related benefits. The truth is though, captive insurance planning is a large undertaking and requires the expertise of some really smart people—attorneys, insurance professionals (preferably ARM and CPCU certified men and women), actuaries, certified public accountants, underwriters…they all play a pivotal role in the formation and operation of a captive insurance company so that it can be compliant with federal and state laws. 
That said, business owners who are conducting their due diligence may have to contend with captive managers who swear by their services, albeit, unjustifiably. They’ve got years of experience and will “stand by clients when the going gets tough.” At least, that’s how the story goes. The hype, however rarely marries up with the realities of what’s truly necessary to form and operate a captive insurance company. Many captive managers are only qualified to handle the clerical, back office work.
Having a working knowledge of what goes into captive insurance planning can help a prospective captive owner avoid unqualified captive managers and consequently, the mishandling of the captive formation and management process.
If you’re unsure on what the best captive insurance planning companies should be doing, read on. We’ve explained what to look for when you’re researching who to go with.
1) Your Business Risks Should Be Assessed via an On-site Feasibility Study. The foundation of captive insurance planning is established when an experienced insurance professional can assess the level of risk a business owner actually has. The risks and associated dollar figure determines whether or not they qualify to form a captive.
If, for example, you own a manufacturing company, you may already be covered for certain liabilities at the site of your operations. But what about supply chain risks? If you buy raw materials from overseas, how can you be sure that you’re covered for certain international risks? Perhaps you follow an unconventional process or use non-standard machinery. Maybe a small pollution mishap while transporting materials could contaminate area groundwater or other natural resource. Ambiguity surrounding what the risk levels are could land captive owners in hot water—overestimating a businesses’ risk could violate the laws set for insurance companies.
During a feasibility study, the risks of a business are determined, quantified, and used as a determinate for captive ownership. Conducting the feasibility on-site ensures that nothing gets missed and helps to accurately set premium levels.
2) The Best Captive Insurance Planning Companies Provide Turnkey Services. Marketing jargon has gotten the better of some “captive managers,” as they position themselves as experts in the business, offering turnkey services. “Turnkey” is defined by “the provision of a complete product or service that is ready for immediate use.” Charging a premium for a la carte services doesn’t encapsulate the term. It puts the onus on business owners who already have their hands full running businesses, and forces them to pay extra for the tax, legal, and insurance work that should be a given when forming and operating a captive. Capstone offers true turnkey captive insurance planning services to mid-market businesses. In partnership with its affiliated law firm, the company offers insurance, legal, tax and accounting services in one convenient package.
3) The Best Captive Insurance Planning Companies Take Claims Seriously. If a captive owner files a claim, the best captive managers will be timely in delineating funds to cover losses. With conventional insurers, there lies the potential for delayed wait times and denials. Since the captive has been formed to cover the risks of its affiliated company, claims are handled expeditiously.
4) You Should Be Working Within an Experienced Domicile. Captive insurance companies are regulated by their domicile (or jurisdiction). Flexibility, experience, and a progressive legislative environment are the attributes of a qualified domicile that should be analyzed during the captive insurance planning process. Newly-established domiciles may not have the experience to handle some of the complex issues that may arise for captive owners. Although captive legislation might be in place for these newer domiciles, a learning curve for these regulators is likely.
Since 1998, Capstone has become the premier captive insurance planning company for closely-held mid-market businesses in both the U.S. and offshore. Our true turnkey services provide clients with an exceptional suite of captive services, including tax and legal support. Working with a true turnkey service provider ensures that the ongoing management of your captive insurance company will be thorough and compliant with state and federal laws.
To learn more about Capstone’s true turnkey service, please call us at WEB_TEL.