Risk and Reward: A Third, More Powerful Opportunity
Traditional risk-reward is an either/or proposition. Captive insurance offers a third option: take less risk and gain a bigger reward through owned insurance coverage.
The Risk?
Someone said, "Your chariot awaits" as the vintage 1963 Cessna 210 approached the hanger. The risks appeared to be very apparent and overwhelming fear and despair set in. Could it take off? How could it fit four grown men? Would it stay together? Was flying even safe? Was the risk worth it?
Quickly perception changed. The perceived risk had already been addressed, countless times. The Cessna and the pilot had successfully taken off and landed thousands of times. Four grown men had more room than most commercial flights with more comfortable cushions and seats. Annual inspections and regular maintenance as well as constant attention keep this plane well qualified for flight now and in the future. Statistics, experience, and proper compliance show it was and is safe to fly.
The Reward
The rewards of taking that flight included less risk, protection and safety, a trip of a lifetime, flying instructions, viewing spectacular northern lights, incredible fishing, gourmet meals, bald eagles, swimming caribou, and 200 miles of lake. Similarly, captive insurance rewards include protection of your company, retained assets, control, flexibility, ownership of new assets, efficiency, insurance, a new profit center, and a better way.
A Third, More Powerful Opportunity
One of the problems with traditional risk-reward scenarios is the fact that it is an either/or proposition -- either take a lot of risk to get a big reward or take less risk and receive less of a reward. There is a third more powerful opportunity: take less risk and gain a bigger reward.
Through captive insurance, a business owner insures risk of his or her operating company. Because premiums are paid to the owner's own insurance company, the profits of the insurance company create one of many significant rewards, all the while insuring the owner's operating company. Captive insurance is the way to reduce risk and have significant, plentiful rewards.
Exponential Benefits
The rewards are great, and when coupling them together they provide exponential benefits. Some of these rewards include protection of operating business exposures such as medical, general liability, employee liability, surety bonds, cyber liability, data breach, loss of income, loss of a key client and 65 additional lines of coverage as well as wealth accumulation, flexibility, and greater cash flow. The greater the business, the more there is to protect, as there is greater risk of loss.
Beyond Traditional Formulas
Risk management is often measured in terms of formulas, computations and ratios. Examples include beta, Sharpe ratio, and standard deviation. These formulas are proven and effective, yet the premise is based upon traditional either/or scenarios of the greater the risk the greater the reward, or the smaller the risk and the smaller the reward.
Life is full of risks, and business owners carry the responsibility of even more. Risks include systematic risk, unsystematic risk, market risk, business risk, liquidity risk, default risk, interest rate risk, inflation risk, credit risk, regulatory risk, legislative risk, and many more. Risk management is critical to the ongoing success of every business owner.
"What great thing would you attempt if you knew you could not fail?" -- Robert Schuller
Captive insurance insures risk and provides great rewards.