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Captive advantages

A Captive is a unique and very flexible tool which can effectively solve a number of problems:

Significant cost saving of insurance

The company ceding risks to its Captive is focused first of all on optimal and effective protection of these risks. Using classical insurers means that you are paying for their overheads and contributing to their profits, whereas the cost of insurance in a Captive is the cost of real protection corresponding to the statistics of the parent company.

Reinsurance

The Reinsurance market is more flexible and cheaper than the insurance market, but it can be approached only by insurance and reinsurance companies.
Managing risks by means of a Captive, the parent company not only gets access to this market and, as a result, price advantage, but also a unique opportunity to use the tools of the reinsurance companies for protection of its insurance portfolio. This approach (by means of excess of loss or stop loss reinsurance) will allow you to keep most of the premium in the Captive and at the same time ceding a part of liability to the reinsurers and hence reducing risk.

Tax advantages

The main disadvantage of self-insurance is the obligatory tax payment before forming a self-insurance fund that considerably influences its size and efficiency. Any premium payment to the insurance company is classified as an expense.
Using a Captive allows the parent company an opportunity to accumulate the insurance premium in the form of insurance reserves (as in self-insurance funds) and to classify premium payment as attributed costs.
Taking into consideration that a Captive can be located in jurisdictions with preferential tax treatment the parent company can also benefit from a number of advantages from the subsequent investment activity. It allows you to generate a very effective fund for payment of possible losses. 

Investments

A Captive keeps cash flow within the group enabling the parent company to completely supervise the investment portfolio generated from the insurance/reinsurance premium.

Non-standard risks

There are risks for which proper coverage cannot be obtained in the insurance market or where the price of such security is too high. Using a Captive allows the parent company to approach the more flexible reinsurance market or establish more efficient self-insurance funds.

Risk Management

Use a Captive can improve the philosophy of risk management in the parent company. The lower the losses that occur, the more profit is generated in the Captive which, if necessary, can be returned to the parent company in the form of dividends.

If you would like more information on how your business structure can benefit from different Captive advantages please contact our experts and they will be glad to assist you.

Materials
Challenge Group Presentation
Agricultural Insurance
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