private insurance company - captive alternatives · protected captives author: david kirkup created...

PRIVATE INSURANCE COMPANYTurning Risk into EquityMark Sims

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vWhat are Private Insurance Companies?

TYPES OF BUSINESS RISK

Commercial Insurance• High frequency / Low Value• Typically buy insurance• Many Small Claims - WC, GL, Employee

Benefits

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Private Insurance Company• Low Frequency/ High Value

• Typically ignore and hope for best

• Few Large Claims - Cyber, Brand, Regulatory…

HIDDEN RISK IN YOUR BUSINESS

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MOST COMMONLY SELECTED COVERAGES

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vHow Does it Work?

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PREMIUM FLOW

Insured Business•Pays

Premium to Licensed Insurer

Insurance Company

(Madison International)

•Issues Policies to Insured

Reinsurance Company

(MadRE)

•Provides Risk Distribution and Cell structure

Protected Cell •Assumes Insured Risk

Business OwnerWarrant Holder

of PC

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RISK & PREMIUM FLOW

Entity

Insured

MADISON INTERNATIONAL

MADISON RE I.I.

Protected Cell

Cash Flow

Premium

100% of Premium

40% Held for 1 Year

60% Immediately

Risk Distribution

100% of Risk

100% of Risk

50% to Claim Pool

50% to Protected Cell

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PC 999

PC 001

PC 002

PC 005

PC 004

PC 003

MadRE

Puerto Rico

Separate cells

Tax Benefits

Risk Sharing

Madison International

STRUCTURE

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Formation Process

FeasibilityData

ImplementSelect

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• One time start up cost: $6,000 per $100K - maximum of $60K

• Capital pledge required: 1/3rd of PC premium

• All-in Management Fee: 8% -10% depending on premium size

• Set up time: In Puerto Rico one week (typical insurance manager: 60 –

90 days)

A very efficient and fast-track process to establish a PrivateInsurance structure.

msims@captivealternatives.com

1155 Mount Vernon HighwaySuite 800Atlanta, GA 30338

p: 404-823-6200c: 812-327-3341f: 678-366-2458

Captive Alternatives, Captive Alternatives LLC, or any of its affiliates or referral sources, do not give legal, tax, accounting or investment advice. You will need to obtain independent legal, tax or investment advice for this proposed Captive. Your business will obtain this advice from its licensed CPAs, tax or legal professionals. All Pro Formas are Examples Only. Individual Results Will Vary. Also note: tax rate indicated is only for present estimated federal tax rates; state tax rates or possible direct procurement taxes are not addressed due to differences between the States.

MARK SIMSVP OF BUSINESS DEVELOPMENT