Phi Initial Presentation 12 17 08
- 1. P rivately H eld I nsurance, LLC Presentation for:
- 2. Captive Insurance Entities What is Captive? Why Create A Captive? Why Offshore and Why Anguilla? Implementation Steps and Timeline PHI Services Recap & Questions
- 3. What is a Captive? Very simply, a captive is an insurance company that you own. You then use the insurance company that you own to provided insurance to yourself. The insurance company may provide various types of insurance you now purchase from someone else.
- 4. Why Create A Captive? Reason #1: Make a profit! Reason #2: Create a financial asset. Reason #3: Control cost of risk As the owner of the insurance company you can make additional money and have more ongoing control of your insurance needs.
- 5. Optimal Solution Profit / Asset Protection : The owner runs the captive to protect the assets in the captive and make money. Ownership : The owner keeps the premiums otherwise lost to an insurance company. Control : Captive empowers the owner to control the claim, coverage and cost of risk. The Captive Structure Control Ownership Profit
- 6. Why Offshore? U.K. law attaches Access to major re-insurers and carrier fronts Limited right of Discovery Not subject to U.S. court jurisdiction No statutory accounting No Yellow Book International generally accepted accounting principles
- 7. Why Anguilla? Lower regulatory expenses Price Waterhouse performs financial audits No requirement that a board member be a resident Economical annual licensing fees / full transparency Annual actuarial study required Captive Funds may be invested stateside
- 8. Captive Formation Steps 0-30 Days 90 – 180 Days Begin Operations! Capitalization Front Company If Needed Engage PHI Organization Documents Preparation Name Selection & Incorporation Open Bank Account Reinsurance If Needed Business Plan & Financial Projections Meeting With Captive Regulators File Captive Application Timeline 30-60 Days 60-90 Days
- 9. PHI Role & Strategic Partners Reinsurance & Fronting – Guy Carpenter Actuarial – Merlinos & Associates Offshore Bank – Safe Harbor Bank Offshore Counsel – First Anguilla Trust Company, LTD. Offshore Auditors - Price Waterhouse Coopers (PWC) Medical Group Benefit – Capitol Administrators of S.E., LLC Claims – Usually Provided by the Fronting Carrier Offshore Captive Manager –Taino Insurance Managers, LTD Onshore Administrator - PHI
- 10. Create a Captive Insurance Solution Reinsurance Fronting Risk Management / Loss Control Compliance & Legal Treasury & Banking Accounting Investment Strategy Actuarial Audits Policy Administration Claims Management Captive Management PHI INSURANCE ACCOUNTING MANAGEMENT PHI manages all your needs to create, operate and grow your captive insurance company. Build an asset, capture control and add profit to the bottom line!
- 11. Captive Models & Structure Medical: Group health policy. Liability: Self issued insurance coverage. Workers Comp: Self insured mandated coverage. Risk Sharing: Participate in risk of issued premiums. The captive model has many variations to fit your business. Each provides a vehicle to make a profit, build an asset and provide more control to you.
- 12. Medical Group Health Captive A Medical Group Captive is set up to provide group insurance coverage to your employees. The group plan can be tailored to fit your individual needs. Supplemental insurance protects catastrophic losses. Control of the plan limits your risks and control over cost increases. A Medical Group Captive provides better coverage to your employees and makes your business more competitive.
- 13. Medical Group Example Model A customized plan that covers the lower risk exposures, provides a long term platform for complete coverage for the employees with a growing and profitable asset. Individual Employee Group Policy Premium Distribution $100K $1M $500K $850K Group Limits $1M AT RISK AGGREGATE RISK TOTAL Employer Contribution $150K Varies Based on Spec Loss Coverage Cost Employee Contribution
- 14. Employer Owned Life Insurance Employer issues employee life policy Employer pays premium Employer deducts premium as business expense Employer owns life insurance policy Employer is the beneficiary Employer receives death benefit tax free Employer accrues underwriting profit
- 15. Employer Owned Group Life Example Employer issues employer owned life insurance policy insuring employees. Employer pays premium, owns the policy and receives death benefit tax free. Example1,100 employees; $550,000 total annual premium Individual Employee Group Policy Employer Paid Premium $55,000,000 $550,000 Group Limits $50,000 Policy Limit Per Each Employee AT RISK AGGREGATE RISK TOTAL
- 16. Liability Captive You currently pay huge premiums to an insurer. Insurers keep all the profit and interest. Insurers use your funds to pay your claims. When you work hard to control losses, the outside insurer benefits. A Liability Captive is simply an entity set up to issue your own liability insurance policy to yourself.
- 17. Liability Coverage Example Model Captive liability coverage combined with a solid risk reduction strategy provides a model for rapid growth of the captive assets. Controlled risks provide immediate and significant profit. Individual Claim Policy Premiums $250K $850K AT RISK Premium Income $1M Per Occurrence Policy Exposure $1M $3M Policy Aggregate Limits AGGREGATE RISK TOTAL $1.35M Reinsurance
- 18. Workers Compensation Captive Workers Compensation insurance is mandated coverage you must purchase. Insurers keep these funds unless claims occur. Insurers keep all the profit and interest. Insurer issues the policy to comply with statutory requirements. A Workers Comp Captive can be used to issue your own mandated coverage, limit your risk and profits from proper business controls.
- 19. Workers’ Comp Example Model As with the liability model, the worker’s comp model provides a model for rapid growth of the captive assets and the potential for immediate and significant profit. Individual Claim Annual Exposure Policy Premiums $250K $750K $680K $1M Statutory Limits Statutory Limits AT RISK AT RISK TOTAL Premium Income
- 20. Risk Participation in Issued Policies You are collecting huge premiums for insurers. Insurers make money on premiums collected by deferring tax, making an underwriting profit and accruing interest on investments. The captive shares risk on the policies issued by taking a sliver of risk and a portion of issued policies premium. A captive company allows you to participate in the risk and profit from writing good business.
- 21. Risk Participation Example Model The risk participation model provides a long term growth opportunity to participate in a profitable book of business with proper risk distribution. Individual Claim Total Premiums $50K $1M Per Occurrence Limits AT RISK Premium Income Total Written Book $1M $10M AT RISK TOTAL $10M
- 22. PHI Orchestration Role PHI manages the entire life cycle of the captive and provides continuous monitoring and adjustments as needed. Captive Setup Investment Plan Setup Ongoing Administration Off Shore Incorporation Captive Licensure Banking Setup & Relationship Operational Captive Captive Model Analysis Policy / Plan Design Filings & Regulatory Setup Financial /Treasury Transactions Back Office Administration Audits & Loss Control Actuarial Analysis Financial Filings & Compliance
- 23. Captive Insurance Opportunity A Captive insurance entity provides your business a financial asset and an additional profit source. Anguilla provides reasonable cost structures. The Captive provides additional controls and insight to make your core business more profitable.
- 24. PHI Complete Captive Management A successful captive is dependent upon two key elements: Proper design and execution of setting up the captive. Competent ongoing oversight and management of an extremely valuable asset. PHI fulfills this role and keeps you informed. PHI Manages the Captive Cycle Ongoing Admin Plan Design Setup