The Captive

Captive Insurance

Control your risk.

David Richter
David Richter, CAIB, CRM
President Commercial Risk & Captive

Are you frustrated with insurance companies?

As a broker and a business owner who has worked in the insurance industry for over 30 years, I was frustrated too. I have seen clients struggle to have their claims processed efficiently or even have their renewals or applications denied. Even worse, I have seen clients hit with increasing insurance premiums even though they have no claims and an excellent safety record. I wanted to do something about it, so I started researching options.

Take a moment.

Roughly calculate your total insurance premium for the last five years.

Now imagine…

Getting a cheque for 30%, 40%, 50% or even more of that total.
It’s unheard of, but not with a captive.


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Business Insurance Core Benefits Improve Risk Management Potential Wealth Accumulation Minimize Insurance Spend Have more control Facilitate cash flow

Benefits of a Captive

Facilitate cash flow

Improve Risk Management

  • Security in all four areas of risk: Financial, Strategic, Operational and Hazard
  • Analysis of risk and claims processed to reduce future costs
  • ROI for Administrative Costs: The Paramount Peak Process

Potential Wealth Accumulation

  • Estate planning
  • Asset growth
  • Asset protection

Minimize Insurance Spend

  • Reduce net insurance cost
  • Provide insurance premium stability
  • Purchase only what is needed

Have More Control

  • Claims process
  • Renewal premium
  • Types of coverage and programs available to you, your business and your employees

Facilitate Cash Flow Improvement

  • Return of insurance premium
  • Investment income

What is a captive?

At its heart, a captive is your own insurance company.

All of us self insure all the time. We choose a deductible and below that threshold, we are prepared to pay for that amount of loss ourselves. The same goes for your company deductible. I can imagine you’ve chosen a deductible that is in the thousands, maybe even up to hundreds of thousands of dollars for some company insurance – depending on what it is.

Now imagine, you join with five, 10 or 15 other companies and insure as a group. You can choose what you want to insure together and what you’d prefer to leave out. You can determine your level of insurance, track your collective claims history and get analytics about your insurance risks. This type of insurance company is called a Group Captive.

We also have Single Parent Captives, where a large company can self insure – this type of insurance works well for companies with many locations or branches or perhaps even franchisees.

Through it all, Paramount is your trusted advisor working to guide you through the process and to administer either the group or single parent captive to ensure The Captive is well managed and operating effectively.

GROUP CAPTIVE

(5-10-15 companies)

Group Captive
Karen’s
Trucking
Reclamation
Company
Catering
Operation
Seismic
Company
Vacuum Truck
Company
Five Other
Companies

SINGLE PARENT CAPTIVE

(1 company)

Main Business
Sales
Offices
Branch
Offices
Warehouses
Retail
Outlets

The Captive Process

If you think a captive is for you and your company, then together we’ll embark on a 6-step process to do our due diligence and set up a structure that works best for you.

1

Initial meeting with you and your management team – this includes the CEO/President and CFO at a minimum. We discuss the basics of ‘The Captive 101’, what it is, how it works and what’s involved. We are looking to determine if The Captive could be a fit for you.
DECISION POINT:
At the end of this meeting, you and your team decide if you want to move forward with the Premium Indication Study. To do so, we will need 5-year loss history and 5-year insurance premium history.

2

Second meeting with you, your management team and trusted advisors such as your lawyer and accountants. We review The Captive Premium Indication Study presentation, which is an outline of your company fit for The Captive based on your 5-year loss history and 5-year insurance premiums.
DECISION POINT:
At the end of this meeting, you and your team decide if you want to move forward with the Viability Study. The cost for this is $2,500 if you are joining a group captive or $10,000 if you are setting up a single parent captive.

3

Presentation of the Viability Study based on 3rd party actuarial findings. This helps us determine your 5-year projections of profit, loss and risk. This in-depth study will also review the potential captive structure, ownership, domicile analysis considerations and shareholder meeting requirements.
DECISION POINT:
At the end of this meeting, you and your team will decide if you want to move forward with the Feasibility Study. The cost for this is $10,000 if you are joining a group captive or $55,000 if you are setting up a single parent captive.

4

Presentation of the Feasibility Study. This phase is to plan out The Captive structure in detail. Actions include meeting with key advisors, negotiating final terms, reviewing final terms, getting a legal review of the insurance structure, creating a business plan and determining shareholders. All the pre-work is being completed.
DECISION POINT:
At the end of this phase, you’ll decide if you want to move forward with implementation. The cost for this $2,500 if you are joining a group captive or $15,000 if you are setting up a single parent captive.

5

Implement The Captive. This includes opening bank accounts, paying lawyers, establishing collateral, submitting applications and setting up The Captive.

6

Ongoing – Owning The Captive is like owning a business. There will be shareholders meetings, decisions to be made and results to be discussed. Once The Captive is operational, Paramount will work with you to ensure The Captive is administered properly and efficiently.

Setting up The Captive is an important decision.

We want to be sure you are 100% confident in your choice and that we’ve answered all your questions.

We want to be sure we’ve done our due diligence to ensure you and your company are a good fit for The Captive.

Anticipated Timeline

1

Initial
Meeting

2 weeks

2

Second
Meeting

2 weeks

3

Viability
Study

2 months

4

Feasibility
Study

3 months

5

The Captive
Implementation

3 months

TOTAL TIME:

9 months

Every person, every business has risk – what matters is how you manage, control and insure that risk.

With The Captive from Paramount, we help you take control of that risk and make it work for you.

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