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Unique and Simple way to own a Captive

Simplify captive insurance conundrums with MSI captive solutions. Our proprietary captive structure enables businesses grossing as little as $1,000,000 or more per year to qualify for the unique benefits of owning an insurance company. Ownership benefits include creating insurance coverage for a business’s unique risks that are not available in the commercial insurance or excess and surplus lines insurance markets. Additional benefits are creating a profit center, better management of risk, the ability to cover exclusions in commercial policies and increased risk awareness. MSI’s team of expert captive professionals combines decades of captive management experience who work together on behalf of the captive owner client. MSI clients sleep well at night knowing their captives are compliant and well managed.

These are suggested steps in captive formation:

Step 1: Retain a Captive Manager after careful due diligence
Step 2: Risk assessment via Feasibility Study
Step 3: Captive Structure selection which best meets a business’s needs.
Step 4: Select Domicile
Step 5: Prepare and submit Captive Application to domicile
Most businesses interested in Captives have better than average losses, which means the 3rd party insurance company made a significant profit on those policies.

Captive Formation and Management

Most businesses seeking a captive solution engage the services of a captive manager. There are many skilled captive managers available. Clear communication from a Captive Manager should be understandable to most laypeople, free of insurance jargon. Clear expectations about the frequency of communication from the captive manager need to be set, as well as expected response time when the client communicates with the captive manager. Although a complete response may take time to research, it is important for the captive manager to acknowledge client communications. Comprehensive due diligence prior to hiring a captive manager is crucial. This process sets the stage for the success of a business owner’s insurance company. It is imperative that there is good business chemistry before starting the captive voyage. Carefully screening potential captive managers is both a science and an art.

The process of choosing a captive manager should start with the same fundamental experience and skill set needed in any business partner. Now that a captive manager is selected, it is time assess risk via a feasibility study. Actuaries conduct the study which identifies and measures risk of a business. History of claims from commercial insurance policies are analyzed, as past claims are usually an indication of future claims. The exception to this rule is when claims are greatly reduced or eliminated after specific risk management steps are implemented. If a business has a series of similar claims, and failed at curtailing this type of claim, a captive is probably not a good business decision.

Domicile refers to jurisdiction, which is a state or country under which the captive holds its’ insurance company license. Selection of domicile is based on many factors. The state department of insurance is the boss of the captive.Finally, the captive manager prepares and submits captive insurance applications to the Department of Insurance for the domicile. Captive management refers to the day to day operations which include regulatory, tax filings, underwriting and claims processing, underwriting, compliance, claims processing, along with regulatory and tax changes.

Suites of services offered by captive managers can be extensive and designed to encompass all services. While other managers offer an ala carte menu. Since Captive Managers serve as the Captain of the captive ship, it is important to find the right one.

Expert captive insurance managers provide a seasoned team of captive professionals that provide back-office support for existing captives which includes Actuaries, CPAs, Attorneys, Account Managers and more. Back-office tasks such as staying in compliance, maintaining insurance department filings, creating claims processing procedures and many accounting tasks can be out-sourced to a Captive Manager. Skilled captive managers are an appropriate term for services provided by a Captive Manager.

The captive manager provides a team to reduce, and potentially, eliminate most headaches many captive owners endure. Engaging a captive manager for back-office support of an existing captive means there are no delays as a result of an illness, family emergency, holiday or vacation. When captive owners choose Back-office management from a captive manager, there are multiple professionals who can take care of needs, now. Back-office Captive Management enables the owner to manage his or her business instead of being in the captive management business.

If you already have a captive or are a captive manager, we can handle your back-office

MSI Captives Frequently Asked Questions

What are my potential tax benefits from owning a Captive? There must be a catch.2020-03-21T17:22:08+00:00

Small captives also known as 831b or micro captives can receive up to $2.3 million of annual premium without paying taxes on the receipt of premium.  831a captives with premiums over 2.3 million also enjoy some of the tax efficiency of 831b’s.

Prudent captive managers correlate a company’s gross revenue with an acceptable percentage of insurance costs for that industry.  For example: just because the 831b election allows 2.3 million of premium to be received and deducted from the taxes of the operating company paying the premium to the captive, it does not mean a $4 million annual revenue company could deduct 2.3 million in insurance premiums.  Skilled, experienced captive managers keep clients inside reasonable IRS guidelines.

Captives sound like an interesting idea. My google search revealed too much bad press from the IRS. Why do I want to risk an audit by having a captive?2020-03-21T17:22:16+00:00

In order to gain the true meaning of search results, in depth reading is necessary.  Unfortunately, the bad apple captives who are few and far between, are getting more attention than the thousands of other captives who are formed for the right business purposes.

Captives are expensive and only for the Fortune 500. How could my $5,000,000 revenue company pay all those expenses and have anything left?2020-03-21T17:22:02+00:00

There are 7,000 or more captives and only 500 fortune 500 companies, thus vast majority of captives are created to manage risk of small to midsized companies.  Captive Structures vary depending on the type of business and size.  Management of a captive formed for a $5 million company would use a different structure than a $5 Billion dollar company.

All captive managers operate the same. What makes MSI different?2020-03-21T17:22:21+00:00

Unfortunately, a lot of captive managers outsource most services to third party providers in order to run the captive properly.  This means that a captive owners’ costs will be higher.  MSI has its own back-office support for captives so many of those outside providers would not be needed and thus the captive owner saves money as well as being more efficient.

Let Us Help You!

contact us 831BCaptives.com

For over a decade, MSICaptives.com and Management Services International (MSI) have provided alternative risk solutions, as well as formation and management services to wide range of companies in various industries. We certainly understand that you face a lot of risk as a business owner or risk management professional and that there are exposures and risks that can’t be covered with traditional insurance.

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