Strategies for Making the Most Effective Use of Surplus Funds in a Captive Insurance Company

If you were to ask most corporate risk officers about the primary benefits of creating a captive insurance company to cover their risks, most would point to the opportunities to reduce the cost of coverage and the flexibility to structure coverage to better align with the realities of their companies and their strategic objectives. Those are indeed two of the biggest benefits of the captive strategy.

There is another benefit that is less well known but can be just as important in helping a company remain competitive and profitable in an often-brutal business climate. It involves making use of the surplus balances in a well-managed captive that accrue over time. And while fewer risk officers would be likely to cite the opportunities presented by the surplus as their experiences with their captive structures progress, they'll begin to recognize that those surpluses emphasize even more flexibility and creative uses under their control. Like most forms of retained capital, those advantages are less about the surplus amount and more about how the company leverages its value.

As captive professionals support risk officers through establishing and maintaining their captive insurance structures, determining the best use of surplus dollars should always be one of the primary objectives.

Click here to read the full article, first published by IRMI, and learn about how surpluses generally reflect highly effective management of a company's captive insurance company, specific ways in which surpluses may be leveraged to pursue business objectives, and considerations that inform decision-making about surpluses.

The above information does not constitute advice. Always contact your insurance broker or trusted advisor for insurance-related questions.