Background
The construction industry has seen steady growth over the past few years, and so have the insurance specialists that serve this market. Construction spending in late 2015reached a new seven-year high and climbed at the fastest rate since 2006. While business is solid, new laws and regulations have made CEO’s & CFO’s in the construction industry a highly educated insurance purchaser.
The Risk
Purchasing insurance continues to be difficult and expensive for construction firms. While the risks contractors face every day in their businesses may not have significantly changed, the insurance industry has. Carriers have pulled out of the construction industry altogether, and there continues to be a consolidation of the major players left in the industry. Contractors are attempting to control a very large business expense with fewer options and more uncertainty.
The Solution
A captive insurance company is an insurance company that is established to ensure the risks of its owner and affiliated companies. When properly structured, premiums are tax deductible to the company and received tax-free by the captive. The captive serves as a more efficient method to procure much needed and often required insurance. It is typically more cost effective than purchasing traditional coverage or self-insuring the risk. As the captive receives premiums every year, the increasing capital and surplus serves as an efficient pool of assets for any future losses.
A captive insurance company can be a very unique and flexible tool. It affords the owner a better way to manage their risks and protect their wealth.