Скачать презентацию Captive Insurance Overview Society of Risk Management Consultants Скачать презентацию Captive Insurance Overview Society of Risk Management Consultants

631d48df9ae1b1f75c410b5901258d2c.ppt

  • Количество слайдов: 85

Captive Insurance Overview Society of Risk Management Consultants April 2013 Captive Insurance Overview Society of Risk Management Consultants April 2013

Today’s Presentation § Captive World Summary § Grand Cayman Overview § Captive Resources / Today’s Presentation § Captive World Summary § Grand Cayman Overview § Captive Resources / Our World § Group Captives / Structure § Premium / Loss Funding § Financial Reports § Captive Investors Fund § 831 B Micro Captive § Well Health Group Captive

Captive Insurance World § Over 55 Billion in Premiums § Over 5000 Captives Worldwide Captive Insurance World § Over 55 Billion in Premiums § Over 5000 Captives Worldwide § Almost 50 % based in Vermont, Bermuda, and Grand Cayman § More than 30 States set up as Domiciles § Most Fortune 1000 and many Middle Market Companies are using them

Alternative Market – 2011 Premium Estimates Captive Insurance Companies Self-Insured Program 17. 6% $59. Alternative Market – 2011 Premium Estimates Captive Insurance Companies Self-Insured Program 17. 6% $59. 7 B 29. 4% $92. 3 B Risk Retention Groups, Pools & Trust Traditional Market 49. 4% 3. 6% $10. 9 B Alternatives exceed 50% of the market Source: A. M. Best Co.

Types of Captives Single Parent Group Captive Homogeneous Rent-a-Captive Agency Captive Group Captive Heterogeneous Types of Captives Single Parent Group Captive Homogeneous Rent-a-Captive Agency Captive Group Captive Heterogeneous

Group Captives - Homogeneous § Industry Specific § Normally More Difficult Industry Classes § Group Captives - Homogeneous § Industry Specific § Normally More Difficult Industry Classes § Risk Management Programs Tailored To The Class Of Business § Unrelated Companies Sharing Risk § If Structured Correctly Meets All IRS Guidelines For Tax Deductibility

Group Captives - Heterogeneous § Multiple Industries In The Same Captive § Five Of Group Captives - Heterogeneous § Multiple Industries In The Same Captive § Five Of The Top Ten Group Captives § Geographic And Industry Class Spread Of Risk § Usually Lower Operating Costs § Individual Members Actuarially Priced § Greater Leverage In The Market Due To Size

Reasons to Investigate Captives § Captives are interested in Best of Class accounts § Reasons to Investigate Captives § Captives are interested in Best of Class accounts § Captives Mitigate the swings in the insurance market § Gain Control of the insurance process. § Gain greater Leverage in the insurance marketplace § Greater Incentive to manage the loss control and claims programs

§ Captives allow for Predictability of premiums and operating costs: ─ Actuarially calculated loss § Captives allow for Predictability of premiums and operating costs: ─ Actuarially calculated loss sensitive premiums. ─ Aggregate stop loss can be provided to define maximum liability. ─ Exposure to specific excess losses shifted to reinsurance companies.

The Cayman Islands • Group of 3 islands in the western Caribbean • British The Cayman Islands • Group of 3 islands in the western Caribbean • British Overseas Territory • Locally elected Legislative Assembly • Legal system based on English common law • Population approximately 55, 000 • Economy based on diverse finance industry and tourism

The Cayman Finance Industry World’s 5 th largest financial centre Home to: 300 banks, The Cayman Finance Industry World’s 5 th largest financial centre Home to: 300 banks, including 40 of the world’s top 50 8, 500 + Mutual Funds 728 Insurance Companies Stock Exchange Shipping Registry

The Cayman Islands as a Captive Domicile • Over 35 years experience with captives The Cayman Islands as a Captive Domicile • Over 35 years experience with captives • 2 nd largest captive domicile, writing premium of $12 B & holding assets of $70 B • Well developed infrastructure • Accessible & business-focused regulators • Compliance with international standards • Straightforward incorporation/licensing process • 20 year exemption from any local taxes • No requirement for local directors or attorneys

Captive Resources LLC Who We Are § 25 + years in existence. § 27 Captive Resources LLC Who We Are § 25 + years in existence. § 27 member owned group captives. ─ 5 of the top ten largest member owned alternative risk facilities (Business Insurance) ─ Developed one of the first member owned group Benefits Captive § Approaching $1, 200, 000 in premium. § Nearly 2, 500 member companies. § Created and Oversee $1, 700, 000 Cayman Islands Mutual Fund (established in 1994) CIF. § 100 employees in Schaumburg, IL. § Sister company, Kensington Management, largest independent captive manager in the Cayman Islands.

An Overview of Captive Management in the Cayman Islands An Overview of Captive Management in the Cayman Islands

Role of the Insurance Manager • Licensing and incorporation of captive • Ensure regulatory Role of the Insurance Manager • Licensing and incorporation of captive • Ensure regulatory compliance • Day to day management of the captive • Preparation of financial statements & reports • Liaison with auditors and tax advisors • Provision of Registered Office and Corporate Secretarial function

Profile of Kensington • Sister company to Captive Resources LLC. • Licensed in 1999 Profile of Kensington • Sister company to Captive Resources LLC. • Licensed in 1999 • 30+ captives managed, representing over 2, 500 • • insured entities and over $1, 000 million in premium, including 13 of top 20 group captives globally Largest independent manager (premium) 24 staff, including 14 chartered accountants Team structure Audited by & fully compliant with Cayman Islands Monetary Authority (“CIMA”) requirements

Raffles Overview § Largest Heterogeneous Group Captive § 100% Owned by Policyholders § Incorporated Raffles Overview § Largest Heterogeneous Group Captive § 100% Owned by Policyholders § Incorporated in 1984 § Domiciled in Cayman § Geographic Spread is National § 322 Member Companies § Returned More Than $200, 000 of Dividends to Members to Date § Premiums exceeding $205, 000

Member Expectations Attend and Participate at Board Meetings Refer New Members Member Expectations Attend and Participate at Board Meetings Refer New Members

Why Are Your Costs Lower? Recapturing Previously Lost Dollars Premium $ § Premiums based Why Are Your Costs Lower? Recapturing Previously Lost Dollars Premium $ § Premiums based on your loss experience § Insulated from market conditions § Operating costs are lower § Only good risks are accepted § Enhanced loss prevention and claims management § Return of unused loss funds and investment income

Specific Excess Insurance Statutory $1, 000 Statutory Workers Comp. Umbrella Excess General Liability $500, Specific Excess Insurance Statutory $1, 000 Statutory Workers Comp. Umbrella Excess General Liability $500, 000 Captive Retention Auto Basket & Clash Coverage Included

How Is the Captive Protected? Aggregate Excess Insurance Experience Adjustment Loss Fund How Is the Captive Protected? Aggregate Excess Insurance Experience Adjustment Loss Fund

Captive Flow Insured Profits Marsh, Inc. Zurich N. America Raffles Insurance, Ltd. Gallagher Bassett Captive Flow Insured Profits Marsh, Inc. Zurich N. America Raffles Insurance, Ltd. Gallagher Bassett Axis Reinsurance Zurich Claims Administration Claimant

Risk Control Services § Services Provided – Safety –assessment completed on all members/prospects – Risk Control Services § Services Provided – Safety –assessment completed on all members/prospects – Claims –Special claims handling instructions § § § Risk Control Workshops Webinars Web-Based Safety Training Quality Assurance Group Purchasing Programs Watchlist and Awards – Member Report Card at September Meeting

Risk Control Workshops § § § Requested topics Member Presentations Speaker variety Breakout sessions Risk Control Workshops § § § Requested topics Member Presentations Speaker variety Breakout sessions Networking National Workshops (Risk Management, Owners, CFOs, Safety Staff) § Regional Workshops (Front Line Supervisors) Next National Workshops: October 22 -24, 2012 Orlando, FL w/NSC April 29 – May 1, 2013 Phoenix, Arizona

Risk Control Workshops (continued) Regional Workshops: § § Date May 23 May 24 May Risk Control Workshops (continued) Regional Workshops: § § Date May 23 May 24 May 25 June 6 § § June 7 June 28 August 6 August 8 Location Harrisburg, PA Lancaster, PA York, PA Captive Resources, Schaumburg, IL Raleigh, NC Shreveport, LA Newport Beach, CA Sacramento, CA

2012 Webinars The Third Tuesday of Each Month at 10 AM & 2 PM 2012 Webinars The Third Tuesday of Each Month at 10 AM & 2 PM Date Jan 17 Feb 21 Mar 20 Apr 17 May 15 Jun 19 Jul 17 Aug 21 Sep 18 Oct 16 Nov 20 Dec 18 Subject OSHA Update/Recordkeeping Review Accident Investigation Best Practices Getting the most out of your loss control dollar! Hazard Communication (Haz. Com) and The Globally Harmonized System of Classification and Labeling of Chemicals. What can we do about accident repeaters? Warehouse Safety/Racking Safety Behavior Based Safety Basics Slip/Fall Prevention Use of Social Media in Risk Control Back Injury Prevention Best Practices Transitional Duty/Return-to-work Best Practices Safety Accountability Ideas

Quality Assurance § Web-based Surveys § Claims Management § Loss Prevention Consultant § Workshop Quality Assurance § Web-based Surveys § Claims Management § Loss Prevention Consultant § Workshop Evaluations § Consultant Follow-up

Financial Service Providers Consultant Captive Resources, LLC Insurance Manager Kensington Management Group Actuarial Firm Financial Service Providers Consultant Captive Resources, LLC Insurance Manager Kensington Management Group Actuarial Firm Pinnacle Actuarial Res. Audit Firm Pricewaterhouse. Coopers Tax Firm Ernst & Young Financial Institution RBC - Cayman Independent Financial Analyst John Brown

Sample Member Loss Forecast: $470, 000 Operating Costs: $230, 000 Premium: $700, 000 AROs: Sample Member Loss Forecast: $470, 000 Operating Costs: $230, 000 Premium: $700, 000 AROs: $ Total Pay-In: $700, 000 0

Sample Member Reinsurance Premium distribution into funds: $500, 000 $50, 000 C Fund $300, Sample Member Reinsurance Premium distribution into funds: $500, 000 $50, 000 C Fund $300, 000 B Fund (Captive Shock Loss Layer) $125, 000 A Fund (Captive Frequency Loss Layer) $70, 000 $350, 000 Loss forecast = $470, 000

The Power of Group Captives a typical year The Power of Group Captives a typical year

Loss Example #1 Reinsurance $210, 000 of total claims less than $125, 000 C Loss Example #1 Reinsurance $210, 000 of total claims less than $125, 000 C Fund Accounting $50, 000 Beginning balance $500, 000 C Fund B Fund Accounting $70, 000 Beginning balance $300, 000 B Fund $125, 000 A Fund Accounting $350, 000 Beginning balance - 210, 000 (Total claims less than $125, 000) $140, 000 Remaining balance

“Typical Year” Results $140, 000 A Fund Balance $ 40, 000 Investment Income Remaining “Typical Year” Results $140, 000 A Fund Balance $ 40, 000 Investment Income Remaining B Fund Balance Remaining C Fund Balance

The Power of Group Captives catastrophic claim year The Power of Group Captives catastrophic claim year

Loss Example #2 Reinsurance $210, 000 of total claims less than $125, 000 and Loss Example #2 Reinsurance $210, 000 of total claims less than $125, 000 and a $1, 000 catastrophe claim C Fund Accounting $50, 000 Beginning balance $500, 000 C Fund B Fund Accounting $70, 000 Beginning balance $300, 000 B Fund $125, 000 A Fund Accounting $350, 000 Beginning balance - 210, 000 Total claims less than $125, 000 - 125, 000 1 st $125, 000 catastrophe loss $15, 000 Remaining balance

Loss Example #2 Reinsurance $500, 000 C Fund $210, 000 of total claims less Loss Example #2 Reinsurance $500, 000 C Fund $210, 000 of total claims less than $125, 000 and a $1, 000 catastrophe claim C Fund Accounting $50, 000 Beginning balance - 1, 000 Pro- rata contribution $49, 000 Balance B Fund Accounting $70, 000 Beginning balance $300, 000 B Fund $125, 000 A Fund Accounting $350, 000 Beginning balance - 210, 000 Total claims less than $125, 000 - 125, 000 1 st $125, 000 catastrophe loss $15, 000 Remaining balance

Loss Example #2 Reinsurance $500, 000 C Fund $300, 000 B Fund $125, 000 Loss Example #2 Reinsurance $500, 000 C Fund $300, 000 B Fund $125, 000 A Fund $210, 000 of total claims less than $125, 000 and a $1, 000 catastrophe claim C Fund Accounting $50, 000 Beginning balance - 1, 000 Pro- rata contribution $49, 000 Balance B Fund Accounting $70, 000 Beginning balance - 70, 000 $0 Balance Catastrophe Claim: $175, 000 - 70, 000 $ 105, 000 A Fund Accounting $350, 000 Beginning balance - 210, 000 Total claims less than $125, 000 - 125, 000 1 st $125, 000 catastrophe loss $15, 000 Remaining balance

Loss Example #2 Reinsurance $500, 000 C Fund $300, 000 B Fund $125, 000 Loss Example #2 Reinsurance $500, 000 C Fund $300, 000 B Fund $125, 000 A Fund $210, 000 of total claims less than $125, 000 and a $1, 000 catastrophe claim C Fund Accounting $50, 000 Beginning balance - 1, 000 Pro- rata contribution $49, 000 Balance B Fund Accounting $70, 000 Beginning balance - 70, 000 $0 Balance Catastrophe Claim: $175, 000 - 70, 000 $ 105, 000 - 15, 000 $ 90, 000 A Fund Accounting $350, 000 Beginning balance - 210, 000 Total claims less than $125, 000 - 125, 000 1 st $125, 000 catastrophe loss $15, 000 Remaining balance -15, 000 Additional for cat. loss $ 0 Ending balance

Loss Example #2 Reinsurance $500, 000 C Fund $300, 000 B Fund $125, 000 Loss Example #2 Reinsurance $500, 000 C Fund $300, 000 B Fund $125, 000 A Fund $210, 000 of total claims less than $125, 000 and a $1, 000 catastrophe claim C Fund Accounting $50, 000 Beginning balance - 1, 000 Pro- rata contribution $49, 000 Balance B Fund Accounting $70, 000 Beginning balance - 70, 000 $0 Balance Catastrophe Claim: $175, 000 - 70, 000 $ 105, 000 - 15, 000 $ 90, 000 Shared A Fund Accounting $350, 000 Beginning balance - 210, 000 Total claims less than $125, 000 - 125, 000 1 st $125, 000 catastrophe loss $15, 000 Remaining balance -15, 000 Additional for cat. loss $ 0 Ending balance

“Catastrophic Year” Results § Majority of loss reinsured away § Impact on risk sharing “Catastrophic Year” Results § Majority of loss reinsured away § Impact on risk sharing minimized § Interest income still generated § C Fund balance still returned

The Power of Group Captives high frequency year The Power of Group Captives high frequency year

Loss Example #3 Reinsurance $500, 000 of total claims less than $125, 000 C Loss Example #3 Reinsurance $500, 000 of total claims less than $125, 000 C Fund Accounting $50, 000 Beginning balance $500, 000 C Fund B Fund Accounting $70, 000 Beginning balance $300, 000 B Fund $125, 000 A Fund Accounting $350, 000 Beginning balance - 500, 000 - 150, 000 +150, 000 A Fund Adjustment $0 Ending balance

Premium = A + B + C + Operating Costs Expected Maximum Premium = Premium = A + B + C + Operating Costs Expected Maximum Premium = 2 A + B + C + Operating Costs Assessment = A (one additional A Fund Premium) Assessment = Claim Indemnification = Experience Adjustment

The Power of Group Captives how are adjustments funded? The Power of Group Captives how are adjustments funded?

Experience Adjustment Schedule Year 1 Year 2 Year 3 Year 4 $700, 000 50% Experience Adjustment Schedule Year 1 Year 2 Year 3 Year 4 $700, 000 50% 30% 20% Premium paid of experience adjustment due (Paid quarterly) $150, 000 -75, 000 $75, 000 -45, 000 $30, 000 (Remaining balance) A Fund Claims Exceed A Fund contributions by $150, 000 $30, 000 -30, 000 $0 (Remaining balance)

“High Frequency” Year Results $ 70, 000 B Fund Balance * $ 50, 000 “High Frequency” Year Results $ 70, 000 B Fund Balance * $ 50, 000 C Fund Balance * $ 20, 000 Estimated Interest $140, 000 Estimated Results ($150, 000) Adjustment Paid ($ 10, 000) Estimated Cost for $150, 000 of additional claims frequency * Some of these dollars will be risk shared.

Adjustments Are Paid Directly Into Loss Fund Accounts § No operational costs (other than Adjustments Are Paid Directly Into Loss Fund Accounts § No operational costs (other than FET) § No lump-sum payment § Adjustments evaluated every 6 months § Return of funds if reserves are reduced below initial payments

The Power of Group Captives what is my investment? The Power of Group Captives what is my investment?

Collateral Functions Cash Letters of credit Member to member obligations Capitalizes the captive Collateralize Collateral Functions Cash Letters of credit Member to member obligations Capitalizes the captive Collateralize policyissuing carrier

Collateral Requirements Assume A Equals $350, 000 Each Year 1 Year 2 Year 3 Collateral Requirements Assume A Equals $350, 000 Each Year 1 Year 2 Year 3 2/3 rds of A Fund 1 st year 2/3 rds of A Fund 2 nd year 2/3 rds of A Fund 3 rd year $233, 333 $233, 334 Total = 2 X average A Fund = $700, 000

Equity Analysis Profit & loss statement for each underwriting year by member Equity Analysis Profit & loss statement for each underwriting year by member

Equity Summarizes all financial activity by member Equity Summarizes all financial activity by member

Member Company Table of Contents – March 31, 2012 § § § § Executive Member Company Table of Contents – March 31, 2012 § § § § Executive Summary Balance Sheets Statement of Income & Expenditure Cumulative Statement of Income & Expenditure Tail Fund Summary Notes to the Financial Statements Claims Indemnifications Receivable Equity Schedules – 2011/2012 Underwriting Year – 2010/2011 Underwriting Year § Investment Income Allocation § Equity Summary Page 1 2 3 4 5 6 -8 9 -26 27 -57 58 -87 172 -210 211 -234

About the Captive § All insureds are owners § One vote per member § About the Captive § All insureds are owners § One vote per member § Operates with committee structure § Incorporated under Cayman Islands law § Management of claims is critical § Participation is required § Members help the captive to grow

Share Certificates Share Certificates

Share Certificates § $31, 000 purchase price ($100 Common share/ $30, 900 Preferred share). Share Certificates § $31, 000 purchase price ($100 Common share/ $30, 900 Preferred share). § Common Share - Voting rights, retains obligations for assessments & security collateral. § Preferred Share – Retains dividend rights, shareholder can be different from common share & share can be fractionalized. § Shares can be transferred at a later date, subject to Board approval. Need to consider current share valuation.

Tax Forms Tax Forms

Form 5471 § Form 5471 – Information Return of U. S. Persons With Respect Form 5471 § Form 5471 – Information Return of U. S. Persons With Respect To Certain Foreign Corporations § Forms prepared by E&Y after the Audited Financials are approved by the Board § Primarily an informational reporting document

Form 5471 (cont’d) § Allocation of Raffles’ taxable Earnings & Profits the amount of Form 5471 (cont’d) § Allocation of Raffles’ taxable Earnings & Profits the amount of “Subpart F income” attributable to the shareholder is reported § ALL Common and Preferred Shareholders receive a Form 5471 - Common share’s Subpart F income always $0 - Preferred share equals member’s share of total Subpart F income § File Form 5471 with each shareholder’s federal tax return § $10, 000 penalty for failure to file

New IRS Forms § Form 8937 – Report of Organizational Activities Affecting Basis of New IRS Forms § Form 8937 – Report of Organizational Activities Affecting Basis of Securities § Form 8938 - Statement of Specified Foreign Financial Assets § Forms newly required (December 2011 & January 2012) § As always, member should consult with their tax advisor § Forms only report information; Form 8937 is filed by the captive (not the member), but Form 8938 does have to be filed by the member (if applicable) § IRS is looking for abuses and unfortunately has swept in taxpayers who have properly followed the rules; as our shareholders have § Forms are prepared by E&Y

Form 8938 § Form 8938 – Statement of Specified Foreign Financial Assets § A Form 8938 § Form 8938 – Statement of Specified Foreign Financial Assets § A new form, required for 2011 and subsequent returns of certain shareholders (a “specified person”) that own “specified foreign financial assets” that exceed certain thresholds (examples - $50, 000 if single taxpayer, $100, 000 if married) § Shares of foreign corporations like Raffles, owned by a specified person, could be “specified foreign financial assets” depending on their value and/or whether other foreign assets are held by the shareholder § IRS, by requiring this form, is looking for shareholders who do not report income on foreign assets; as to interests in Raffles, that is already fully reported on Form 5471 § Forms prepared by E&Y, but consider all foreign holdings § Informational reporting document that will only report that the shareholder already files a Form 5471 for this asset

THE CAPTIVE INVESTORS FUND Cayman Islands THE CAPTIVE INVESTORS FUND Cayman Islands

CIF NET ASSET VALUE $1, 753, 559, 000 (As of 3/01/13) RAFFLES $363, 176, CIF NET ASSET VALUE $1, 753, 559, 000 (As of 3/01/13) RAFFLES $363, 176, 000 March 2013 YTD 3. 15% 2012 Return 9. 13% 2011 Return 0. 51% 2010 Return 7. 35% Annual Return Since Inception 5. 96%

Captive Insurance Company Investment Strategy Diversification To Minimize Risk Preservation of Capital Maintain High Captive Insurance Company Investment Strategy Diversification To Minimize Risk Preservation of Capital Maintain High Credit Quality To Support Outgoing Letters of Credit Meet Liquidity Needs to Pay Claims Achieve Favorable Returns on Portfolio

Captive Investors Fund Benefits Control – Ability to participate in direction of the fund Captive Investors Fund Benefits Control – Ability to participate in direction of the fund Specifically designed for CRI captives 85% collateral value Liquidity – Ability to liquidate Each month end at no cost

Captive Investors Fund Risk Management Diversification To Minimize Risk Specific Investment Guidelines High Quality Captive Investors Fund Risk Management Diversification To Minimize Risk Specific Investment Guidelines High Quality Securities Quality Investment Advisors Active Involvement & Oversight by Investment Committee/Board

The Captive Investors Fund Asset Allocation APPROVED GUIDELINES CURRENT ALLOCATION TARGET ALLOCATION Intl Equities The Captive Investors Fund Asset Allocation APPROVED GUIDELINES CURRENT ALLOCATION TARGET ALLOCATION Intl Equities Not to exceed 20% Intl Equities 15% Intl Equities Not to exceed 20% US Equities 25% US Equities 20% Alternative Assets Not to exceed 10% Fixed Income Fixed Income No Less No less than 50% Than 50%

ACTIVE INVOLVEMENT & OVERSIGHT ACTIVE INVOLVEMENT & OVERSIGHT

Captive Investors Fund Board of Directors RBC (Cayman) Fund Administrator Investment Committee Investment Advisors/ Captive Investors Fund Board of Directors RBC (Cayman) Fund Administrator Investment Committee Investment Advisors/ Permissible Investments RBC Investor Services (Toronto) Fund Custodian Fund Shareholders Captive Insurance Companies CRI Consultant

Introduction to Micro Captives & the 831(b) Election Introduction to Micro Captives & the 831(b) Election

Outline § Microcaptive Insurance Company Basics § Risk Transfer § 831(b) Tax Election § Outline § Microcaptive Insurance Company Basics § Risk Transfer § 831(b) Tax Election § Structure § Coverage Considerations § Pricing Approaches § Proforma Example § Next Steps

What is a “microcaptive” insurance company? § “Micro” means the insurance company falls under What is a “microcaptive” insurance company? § “Micro” means the insurance company falls under one of the sections of the tax code controlling small insurance companies, especially IRC Sec. 831(b). § “Captive” a company that provides insurance to, and is controlled by its owner(s). § First and foremost, it is an insurance company! § What does this mean?

Why a microcaptive? § Greater control of risk § Reduced expenses (captive vs. admitted Why a microcaptive? § Greater control of risk § Reduced expenses (captive vs. admitted insurer) § Ownership of improving results § Additional, customized coverage § Reasonable capital requirements § Minimal regulatory barrier to entry § Tax advantage § Buy-out or retirement planning § Generational transfer § Supplements Group Captives very well

Qualifying Factors § First & foremost : this is an insurance company § $1. Qualifying Factors § First & foremost : this is an insurance company § $1. 2 million ceiling on annual premium income § Design the insurance to fit individual needs § Pre-Tax earnings of at least $1. 5 million § Viable for closely held or public companies

Tax Planning Benefits § Deductibility of premiums § 162/§ 212 § Assuming premiums are Tax Planning Benefits § Deductibility of premiums § 162/§ 212 § Assuming premiums are market comparable or can be valued by an actuary § Taxation of CIC’s profits § 831(b) provides tax exemption from premium tax and from underwriting profit. § 831 (b) must be elected timely and cannot be revoked without permission of Secretary § Federal Tax on investment income only § Retirement § Certain investments and structures could allow client to access CIC invested funds tax efficiently. § Estate/Gift Taxes § Could transfer millions to heirs tax efficiently.

Captive Insurance Company Policies § § § Everything a business currently self-insures: § Deductibles Captive Insurance Company Policies § § § Everything a business currently self-insures: § Deductibles § Excess losses above coverage limits § Environmental Liability Loss of income as a result of: § Losing key employee/salesperson § Loss of license/professional risks (professionals) § Loss of a key contract (Gov’t. contractors) § Weather, terrorism, etc. Liability defense expenses: § Employee lawsuits – sexual harassment, wrongful termination, discrimination, etc. § Environmental issues § Professional claims Suggest Focus on First Party Liability Second A Fund for CRI Clients

Examples of Captive Insurance Policies Written §Professional liability Gap Coverage §HIPAA/Billing Audit Liability §Contractual Examples of Captive Insurance Policies Written §Professional liability Gap Coverage §HIPAA/Billing Audit Liability §Contractual Liability §Cyber Liability §Environmental Liability §Excess Environmental Liability §Labor Shortage/Strike Loss Reimbursement §Employment Practices §Employee Dishonesty §Patent Infringement/Intellectual Property § § § § § General Liability Gap Property Management Professional Misconduct Product Recall FDA Administrative Actions Liability Product Liability Gap Directors and Officers Liability Punitive Damages Loss of Key Employee Wind Deductibles on Property

What makes it an insurance company? § § Primary business activity must be insurance What makes it an insurance company? § § Primary business activity must be insurance § (a. k. a. Legitimate Business Purpose) § Needs to be operated like an insurance company Premiums and policies must be § Market-comparable § Risk-based § Established at arms length § Actuarial support is strongly encouraged Initial capitalization must be adequate § 4: 1 (premiums to capital) with certain minimums Insurance transaction § Risk transfer § Risk distribution

The Power of Group Captives An Introduction to The Power of Group Captives An Introduction to

Well Health Insurance Ltd. Advantages § Use your current plan design if desired § Well Health Insurance Ltd. Advantages § Use your current plan design if desired § Choose the specific stop loss limit that fits your company best § Specific excess insurance that provides a captive dividend potential § Obtain aggregate stop loss protection if desired § Outstanding wellness initiatives § Select your own third party administrator § Access to local, regional and national PPO networks § Choose your own broker

Well Health Captive Flow Insured Profits Your Broker Your TPA Berkley A & H Well Health Captive Flow Insured Profits Your Broker Your TPA Berkley A & H Well Health Ins. Ltd. Claims admin/adj. Network access Case mgmt. Pre-certification Client svcs. Wellness programs Bill audits Berkley A & H Your TPA Claimant

Self Funded Health Insurance With Captive Reinsurance Annual Stop Loss Limit Catastrophic Reinsurance $240, Self Funded Health Insurance With Captive Reinsurance Annual Stop Loss Limit Catastrophic Reinsurance $240, 000 $40, 000 Captive Reinsurance ($200, 000 in excess of Self Insured Retention) Self Insured Retention Specific Deductible Employee Deductible and Co-Insurance CAPTIVE LAYER LOSS FUND MEMBER AGGREGATE STOP LOSS (MAXIMUM CLAIMS EXPOSURE CEILING)

The Captive Resources Advantage § Independent consultant § Over 28 years’ experience § Captive The Captive Resources Advantage § Independent consultant § Over 28 years’ experience § Captive Investors Fund § Kensington Management Group Ltd. § EPIC - property insurance § Well Health Insurance Captive / Benefits § 831 B Micro Captive Program § Group purchasing programs

Questions? Questions?