Captive insurance has gained popularity since its first use in the 1950s, and today many types of businesses use it as a cost-effective way to manage their complex risks. A single parent captive is one type of insurance strategy, and using it can have many benefits.
Types of Captive Insurance
When a parent company establishes an insurance company to ensure its own employees and properties, that strategy is known as a single-parent captive. In contrast, a group captive is a company owned by several companies that may represent similar or disparate industries. The third type of captive is known as a hybrid, or segregated cell, captive. In this latter scenario, a company rents capital from the captive to provide insurance but does not actually own the insurance provider.
Benefits of Single Parent Captives
Although group and hybrid captives might be preferable in certain situations, there are many benefits to using a single-parent captive. Here are some of these perks:
- Lower premiums
- Increased coverage
- Lower taxes
- Accumulation of wealth
- Ability to offer workers’ compensation and auto insurance to employees
Using single-parent captive insurance provides a company with the greatest control over managing its own risks. Your insurance agent can help you explore whether this alternative form of insurance coverage might be right for you.