Fairly Predictable Long Payout Periods Advantages Flexibility No Loading No

Fairly predictable long payout periods advantages

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Fairly Predictable Long Payout Periods Advantages Flexibility No Loading No admin, marketing costs Time Value of Money Disadvantages Catastrophic loss Possibility Firm may have to perform admin functions ASO (admin Services Only) TPA (Third Party Admin) Can be a PR nightmare Could give impression firm is unstable Can’t pass blame to anyone else Hard to go back to insurance market after leaving Income Tax Treatment Insurance
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Premium are tax deductible in that tax year when they are paid Premium represents cost of losses that have yet to occur Self-Insurance Losses & admin expenses are tax deductible only once they are paid Captives Formed when Hard Markets occurred causing the cost of insurance to rise Also used for tax issue with self-funding Captive Insurer Wholly owned subsidiary of company (parent is not even in the insurance business) Primary Purpose to insure risks of parent company 2 Types Single parent captive Association/Group captive Advantages Helps in hard markets Located in Bermuda & Cayman Islands Can right premium off as “true risk transfer” In group need to put in no more than 30% Reasons Save money on premium Freedom-single- to cover or do whatever they want Freedom-group-tax reasons
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  • Fall '07
  • Drennan
  • Financing Type

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