Workers Compensation Captives – A Legitimate Yet Complex Alternative
Workers Compensation Captives have come to the forefront as a possibly viable alternative for Workers Compensation coverage. Last week, I decided to explore Captives further by attending the CICA conference in Tucson, AZ.x
After attending many of the sessions, I came away with a few thoughts and questions. I thought I would briefly cover them.
Are captives for every company? No, as it is a form of modified self-insurance, a small company could not survive the impact of a very large claim or a number of claims over a short amount of time.
What companies would find it the most advantageous to use captives? For Workers Compensation, I would say a very large company that does not have enough assets in a certain state to qualify for self-insurance. A great example is a very large trucking firm that has a large home office complex with terminal in multiple states.
Is there one domicile that is better for captives than the others? No, I do not think there is one domicile that is superior to another in every instance. I do like the offshore domiciles. As I have said very often, a stroke of the President’s pen, a ruling by the IRS, or a bill passed by Congress could change the onshore domiciles overnight. That would not happen with an offshore domicile.
Are rent-a-captives still a viable option? I think this is the forefront of future Workers Comp insurance arrangements. Renting a cell from a captive allows the same right and tax advantages as owning a regular captive. The fixed or overhead costs would be much smaller than starting a captive.
What is the one main disadvantage to captives? I think it is a very simple concept that has been complicated as a profit motive for companies. The more complicated it seems, the more pseudo-knowledge is produced. Captives are not that complicated.
Where can someone learn about captives quickly? Google Workers Compensation Captives, there are hundreds of websites with a large amount of free information.
©J&L Risk Management Inc Copyright Notice