Captive Insurance Co's Flourish

Each day I read another state has changed it's insurance regulations to make it friendly for captive formation. Larger businesses are using captives as part of their risk transfer program. The reason? Control !  Business owners want to control their destiny's and reducing the cost of risk is one what to gain some of that control. Commerical insurers pass on the costs of their administration and profit in the rates and premiums they charge. Business owners want to get a piece of that for themselves at the same time reduce their risk management costs. Direct access to reinsurers is also making it easier for businesses to bypass the traditional commercial insurance market and do it themselves. Captive insurance companies do demand expertise, committment, and discipline to avoid a insurance meltdown of not having enough reserves to pay claims. If structured right, a captive insurance company can significantly reduce the cost of risk for a business. If I am a traditional insurance company I would be shaking in my shoes as I will see premium attrition due to the increase formation of captives. Over the next ten years I predict this growth will out pace traditional premium growth in the commercial insurance marketplace. Until next time be careful out there and know your risks. K

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