PHI Presentation 07 2015
- 1. PHI: A better idea. Committed to doing the right things right with alternative risk for you Presentation for:
- 2. Captive Insurance Entities What is Captive? Why Create A Captive? Why Offshore and Why Turks & Caicos? Implementation Steps and Timeline PHI Services Recap & Questions
- 3. What is a Captive? A captive is formalized, structured and funded self insurance. Very simply, a captive is an insurance company that you own. You then use the insurance company that you own to provide 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 ControlOwnership Profit
- 6. Why Offshore? U.K. law attaches including tax treaty 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 Turks uses American dollars as currency
- 7. Why Offshore and Why Turks & Caicos? Lower regulatory expenses Economical annual 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 – Risk & Reinsurance Solutions Actuarial – Merlinos & Associates Offshore Bank – Safe Harbor Bank Offshore Counsel – First Anguilla Trust Company, LTD. Offshore Auditors - Porter, Keadle & Moore, LLP. Medical Group Benefit – Capitol Administrators of S.E., LLC Claims – Littleton Group 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 Employer Owned Life: Captive issues 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. 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
- 13. Employer Owned Group Life Example Individual Employee Group PolicyEmployer Paid Premium $55,000,000 $550,000 Group Limits $50,000 Policy Limit Per Each Employee AT RISK AGGREGATE RISK TOTAL 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
- 14. 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.
- 15. Liability Coverage Example Model 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 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.
- 16. 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.
- 17. Workers’ Comp Example Model Individual Claim Annual Exposure Policy Premiums $250K $750K $680K $1M Statutory Limits Statutory Limits AT RISK AT RISK TOTAL Premium Income 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.
- 18. 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.
- 19. Risk Participation Example Model Individual Claim Total Premiums $50K $1M Per Occurrence Limits AT RISK Premium Income Total Written Book $1M $10M AT RISK TOTAL $10M The risk participation model provides a long term growth opportunity to participate in a profitable book of business with proper risk distribution.
- 20. PHI Orchestration Role 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 PHI manages the entire life cycle of the captive and provides continuous monitoring and adjustments as needed.
- 21. Captive Insurance Opportunity A Captive insurance entity provides your business a financial asset and an additional profit source. Turks & Caicos provides reasonable cost structures. The Captive provides additional controls and insight to make your core business more profitable.
- 22. 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