27 December 2019Analysis

Tax benefits low on list of reasons to have a captive

Gaining access to coverage that is not available elsewhere is the number one benefit of having a captive, according to Captive International readers.

Nearly half (45 percent) of respondents to Captive international’s end of year survey said gaining access coverage that is not available elsewhere is the single biggest benefit of having a captive.

While the perception outside the industry might be the single biggest reason to have a captive is for the tax benefits, Captive International readers clearly disagree, with only 5 percent saying this was the biggest advantage to having a captive.

Just under a quarter (24 percent) said gaining greater control over claims was the biggest benefit. “The traditional market does a less than adequate job of representing client's interests in settling a claim,” noted one anonymous respondent.

Just 8 percent said the biggest benefit was gaining access to reinsurance markets.

It was clearly a question that divided opinions, demonstrating the wide range of motivations people have for establishing and maintaining their captives. One respondent argued it is impossible to elevate any one motive above the others, with the real benefit being “the accumulation of multiple factors, including strategic control of risk finance over sustained period.”

One anonymous respondent argued having a captive fundamentally changes the way insureds think about risk. “Thinking more intelligently about risk mitigation provides the largest benefit that in many respects influences a number of the other issues highlighted in this question,” the respondent said.