As a business owner you’re constantly facing challenges, and two of the most daunting of those challenges is business risk and tax liability.

You probably don’t even want to think about it. But wait, as I’m going to show you how to safeguard your business and take advantage of a federal tax incentive with just one strategy.

First, I have a few questions for you.

  • Does your business have real risks that could justify insurance?
  • Could you benefit from a large, annual, flexible premium contribution amount, and current tax write-offs each year?
  • And, how about having a tax efficient pool of funds, that you can direct the management of, growing alongside your business after they have already given you a huge tax benefit up front?

If you’re answer to these questions is yes, yes and YES, then it’s quite possible that mitigating both your business risks and your tax liability could be done effectively with a captive reinsurance company.

This strategy allows you to take a current tax deduction, each year, for up to $2.2 million in otherwise taxable income from your business as an insurance premium. The tax benefits can be very attractive in the right circumstances.

Now, give me a few seconds to take you through the technical yet simple aspects of a captive reinsurance company.

As you know, a captive insurance company is the formation of an insurance company to directly insure business risks.

The captive reinsurance company differs in that it reinsures one or more risks currently covered by your business casualty policy.

As most of the heavy lifting such as quantifying risk, setting underwriting guides and paying claims, is already being done, the primary focus can be set on:

  • Better control of risks;
  • Material tax savings each year;
  • Improved control over losses;
  • Expanded insurance coverage;
  • Improved risk diversification;
  • Enhanced capacity to honor warranties (if applicable);
  • And most importantly, the establishment of a fund to neutralize potential casualty losses.

In essence what you’ll find is that operating a captive reinsurance company is simpler, cheaper and offers even more benefits for the business owner to enhance your overall financial plan, including 100% control over the reinsurance assets, no tax on insurance profits and taxes only on the net investment income.

So now you’re asking is a captive reinsurance company suitable for your business specifically?

Well, if your business has casualty risks that cannot sufficiently be covered under regular commercial insurance then it may just be the best solution you’ll come across, regardless of whether your business is financial, medical, legal, industrial or other.

If you’re curious about how this might work for you and how much it could money it could save you, let us know and we’ll talk through it with you. We’re here to serve. We’re Credo.

Contact us for more information on Captive Reinsurance.

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Dan Lucas

As the President and Founder of Credo, Dan advises clients with a strategic CFO mentality, in all aspects of accounting, finance, tax, operational strategy and best practices. He also directs the Credo team in establishing the strategies for the growth of the firm and continually raising the bar on its standards of exceeding clients’ expectations.
He has accrued broad financial experience working with companies ranging in revenues from $50,000 to $60 billion.Dan has worked with technology services, software, real estate, retail, manufacturing companies, professional services firms, marketing/advertising agencies, dental practices, medical practices, and various other industries, providing each with the specific financial guidance needed to establish sustained business growth and financial health.
Dan Lucas
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