Captive Insurance Advantages

The advantages that offshore captive offer are generally the same, but may vary in terms of competitiveness based on the legislation of offshore jurisdictions where offshore captives can be created and registered. Like with any other offshore entity, offshore captives must be properly managed in order to obtain and be able to harness the benefits. Because offshore captives confer a larger degree of control, owners must ever seek to exercise prudency when formulating offshore captive policies.

Offshore captives are favored by many offshore insurance companies because of their ability to create greater cost savings. Costs can be reduced by setting up an offshore captive insurance company through a better balanced method for calculating premiums, doing away with additional fees and creating more access to wholesale reinsurance policies. Premiums payable to the offshore captive insurance company generally result much lower than if they were being paid to another insurance company, because the premiums for an offshore captive insurance company will be calculated using a method that balances the best interests of both the company and the policyholders, and do not necessarily concentrate on generating high profits.

Furthermore, the use of an offshore captive eliminates costs that would otherwise been integrated in premium charges to cover administrative charges, and insurance brokers and agents fees. Offshore captive insurance companies create the possibility of reducing costs in many ways. Offshore captives facilitate access to wholesale reinsurance markets which provide opportunities for reinsuring risks at wholesale rates rather than retail rates.

Creating sustainability is important for offshore companies that intend to operate successfully and for a lengthened period of time. Medium to long-term goals should be established and adhered to. With an offshore captive, this is attainable through the application of underwriting strategies that are conservative, promoting sustainability and capital surplus over the long run, thereby increasing the offshore captive insurance capacity to retain risks.

It is possible and a wise option to invest premiums paid into the offshore captives as to strengthen the company’s capacity to take on risks, surpass solvency requirements, earn profits from underwriting and expand.

A favorite advantage of the offshore captive is its tax free status. Offshore captive insurance companies are not subject to taxation in the jurisdictions where they are incorporated, provided that all the requirements for obtaining such tax treatment are met.

Flexibility is essential to the management and control of any offshore captive. The very nature of the offshore captive makes it possible to design the company to adapt to the offshore insurance needs.

Offshore captive insurance companies are protected by the privacy and confidentiality laws of the offshore jurisdictions in which they are formed. Specific provisions are legislated to establish the grounds for disclosing company information to third parties. Breaches to privacy are punishable by law.

Quicker expedition of claims rests high on the list of benefits that offshore captives offer. Because of moving toward an ‘internal’ form of offshore insurance through the captive, it is must easier and less bureaucratic to place claims and process applications, verifications, payments and investigations. There is much more security that matters will be dealt with expeditiously and that claims will be paid when needed as long as the necessary requirements are met.

Being able to tailoring offshore insurance needs is a major reason for establishing an offshore captive. An offshore captive insurance company can be designed to suit the risk and asset consideration of a company. Policies can be elaborated to take specific wishes into account, and may provide for specific management and control intentions or principles of the company. Being able to customize at this level through an offshore captive insurance company ensures a greater degree of satisfaction, direction and accomplishment from simply knowing that specific wishes are being looked after through the offshore captive insurance company.

Being able to customize an offshore captive insurance company further enhances the ability to create innovative forms of financing and asset securitizing, which can only be achieved with an offshore captive insurancecompany.

Exercising total control over an offshore captive facilitates control over costs, and potential losses, by being in a position to strategize, manage and measure costs incurred and work out premiums, administration and other over heads. In this way, decisions taken can be better justified and a greater understanding about the establishment of certain policies will assist in creating greater consensus between the offshore captive insurance company and the insured – its owners.

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