Fractional CFO Advice on Captive Insurance

In the realm of financial management for privately-owned businesses, the concept of captive insurance has gained traction as a savvy strategy for risk management and tax planning. Salvatore Tirabassi, a seasoned Fractional CFO, has been at the forefront of this movement, advising founder-led and family-operated businesses on the benefits of establishing a captive insurance company.

Captive insurance companies are essentially in-house insurance entities created by a parent company to underwrite its own risks, as well as those of its subsidiaries. This approach allows businesses to directly manage risks that are often difficult to insure through traditional markets, such as digital security threats or rare catastrophic events.

The formation of a captive insurance company is a strategic decision that involves careful domicile selection to ensure a supportive legislative environment, meeting capitalization requirements, and adhering to regulatory standards. While it demands an upfront investment, the long-term control over risk management can be significant.

The financial incentives for setting up a captive are considerable. Premiums paid to the captive are generally tax-deductible, and the captive can generate underwriting profits and investment income. This creates a pool of capital that can be used for future claims or reinvested into the business, potentially yielding additional returns.

States like Utah and Vermont have become prominent domiciles for captive insurance. Utah’s Captive Insurance Companies Act and Vermont’s established regulatory system provide frameworks that support the formation and operation of captive insurance companies. These states offer various captive structures to suit different organizational needs and risk profiles.

In summary, the strategic implementation of a captive insurance subsidiary can be a game-changer for businesses with robust cash flow. It offers a method for tax-efficient risk management and the creation of a financial reserve for potential liabilities. This move underscores a business’s dedication to fiscal responsibility and resilience in operations.

Salvatore Tirabassi, the Managing Director of CFO PRO+Analytics, specializes in assisting businesses with financial strategies that promote growth and stability. His expertise includes guiding companies through the process of establishing captive insurance entities within the favorable jurisdictions of Utah and Vermont.

Christopher Stern

Christopher Stern is a Washington-based reporter. Chris spent many years covering tech policy as a business reporter for renowned publications. He has extensive experience covering Congress, the Federal Communications Commission, and the Federal Trade Commissions. He is a graduate of Middlebury College. Email:[email protected]

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