Examples of Captive Insurance

Actual Captive Results as of February 29, 2016 Financial Statements
Member A - $250K Premiums
Underwriting Year Annual Premium Investment Income Dividends Paid Equity Balance
2009 - 2010 $259,580 $50,830 $31,682 *$0
2010 - 2011 $229,259 $42,058 $175,935 *$0
2011 - 2012 $228,659 $20,390 $75,193 $37,607
2012 - 2013 $227,904 $20,178 $103,417 $77,588
2013 - 2014 $211,616 $15,767 Not Paid Yet $142,012
2014 - 2015 $220,409 $1,648 Not Paid Yet $68,675
Totals: $1,377,427 $150,871 $386,227 $325,882
Member B - $500K Premiums
Underwriting Year Annual Premium Investment Income Dividends Paid Equity Balance
2009 - 2010 $476,672 $77,197 $70,525 $0*
2010 - 2011 $511,296 $45,697 $47,704 $0*
2011 - 2012 $532,057 $51,984 $207,120 $80,201
2012 - 2013 $491,175 $36,255 $37,554 $94,444
2013 - 2014 $483,229 $28,603 Not Paid Yet $251,516
2014 - 2015 $528,764 $4,538 Not Paid Yet $254,268
Totals: $3,023,193 $244,274 $362,903 $680,429
Member C - $1M Premiums
Underwriting Year Annual Premium Investment Income Dividends Paid Equity Balance
2009 - 2010 $1,105,709 $205,076 $176,132 *$0
2010 - 2011 $1,184,510 $182,611 $723,704 *$0
2011 - 2012 $1,148,326 $74,950 $267,635 $129,973
2012 - 2013 $1,014,225 $77,052 $249,350 $292,211
2013 - 2014 $1,047,269 $36,633 Not Paid Yet $48,431
2014 - 2015 $1,018,239 $2,752 Not Paid Yet $475,639
Totals: $6,518,278 $579,074 $1,416,821 $946,254
Member D - $2M Premiums
Underwriting Year Annual Premium Investment Income Dividends Paid Equity Balance
2009 - 2010 $1,724,580 $374,940 $475,858 *$0
2010 - 2011 $1,955,215 $232,951 $745,855 *$0
2011 - 2012 $2,111,438 $170,393 $457,095 $241,062
2012 - 2013 $2,423,484 $191,818 $404,802 $618,093
2013 - 2014 $2,183,699 $92,472 Not Paid Yet $545,414
2014 - 2015 $2,222,802 $11,964 Not Paid Yet $925,495
Totals: $12,621,218 $1,074,538 $2,083,610 $2,330,064

* Underwriting year has been closed.

Read reviews of captive insurance from some of our satisfied customers.

These are REAL Examples of Companies Turning Premiums into Earnings

The logic seems sound, yes, but does it really work? Yes. 

Group Captive Insurance Free Consultation

Check out some examples of how actual businesses have seen great financial gains from starting their own group captive insurance companies.

Policy years do not pay dividends until three years after the policy year has ended. When they pay, the dividend amount is roughly half the equity balance for the policy year.

Each policy year will pay dividends over a course of three years, the second and third years’ dividends being about half the value of the first year’s.

At the time this report was generated, dividends for policy years after 2010/2011 were not yet available for disbursement.

The investment income listed is how much profit an underwriting year has earned so far by investing the premiums.

The longer the money stays in the group captive, the more investment income is generated. This money will continue to accumulate tax-free until the member decides to use it.

A Theoretical Example of Group Captive Insurance

The benefits of captive insurance are very easy to understand. However, it’s always easier to break things down into examples to truly grasp them:

BEFORE

WITHOUT an Insurance Captive

Acme had to pay $500K per year for premiums from a third-party insurer.

Their real loss profile was about $125K per year.

Therefore, the insurance company pockets $375K per year.

AFTER

WITH an Insurance Captive

Acme starts their own captive insurance company.

Acme sets its own price for premiums at $275K.

They use $125K for claims in year 1.

Acme pockets $150K in untaxed earnings.

Don't forget the $225K they saved in the first place.

...and any investment income earned from the unused premiums.

How Do Captive Insurance Companies Actually Work?

Learn everything you need to know about how captive insurance programs work.

It's one thing to understand the meaning of the captive strategy and another to put it into motion. Forming a captive insurance company significantly impacts the structure of your business.

There are myriad tax and IRS-related provisions you must be aware of before creating a new branch of self-insurance within your business.

Why Do Captive Insurance Premiums Fluctuate?

Unlike traditional insurance, captive insurance premiums are based on your company’s unique loss history and risk exposure.

When a company improves its safety record, annual premiums can go down.

Similarly, if a business eliminates or minimizes exposure to certain risks, premiums are also reduced.

Conversely, if a business is experiencing rapid growth and hires many new employees, adds to its vehicle fleet or builds a new factory, this increased risk exposure can be accompanied by an increased annual premium.

In either event, the annual premiums required by captive insurance are always tied directly to your company’s specific history and exposure.

Whether you’re growing or improving safety, captive insurance charges exactly the right premium to turn your risks into earnings.

Captive Brokers Help You Retain the Earnings You Deserve

It is easy to see how switching to a group captive insurance program will lower insurance costs, increase profitability and boost your bottom line. Have Alternative Risk Resources set your company on the path to more control and increased profitability with a captive insurance program. We are always available to explain how captive insurance works, and how we can help your company turn more unused premiums into profits.

Contact captive insurance brokers at Alternative Risk Resources for a free consultation today.
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