Client Services

Academic Captive Management provides turn-key captive solutions for its clients. Our goal is to make the implementation of the captive insurance company seamless, with minimal disruptions to your day-to-day core business operations.

Our services start with a feasibility study to determine if a captive is right for you and your business operation. If appropriate, we proceed through the incorporation and licensure phase, which includes the contractual formalization of the risks to be underwritten through the captive. Lastly, we perform day-to-day management services for the captive so that you and your business associates are not laden with additional administrative burden.

CAPTIVE FORMATION

Feasibility Study

The feasibility study is a detailed analysis that occurs at the inception of the process for forming (or not forming) a captive. It’s the first step in the process with the ultimate goal of determining whether a captive insurance company is right for you and your business operations and fits with your short-term and long-term business and personal goals. The study will answer most of the questions you have concerning the costs and benefits of forming a captive. It is also the first step towards the development of a captive business plan, which is part of the process required by most licensing regulatory bodies. A captive feasibility study generally contains the following components:

• A Multi-Year Cost Benefit Analysis – We will perform an analysis that compares the costs and benefits associated with forming and operating a captive based on certain assumptions over a one, five and ten-year period.

• Pro-Forma Financial Statements – We will prepare five years of pro-forma financial statements based on certain operating assumptions (which will be determined as part of our feasibility study). These financial statements will reflect premium income, investment income, loss projections, risk margins, operating expenses, operating profit, cash, investments, loss reserves, capital and surplus.

• Tax Analysis – We will analyze and report to you on the impact the captive insurance entity is expected to have on your expected federal and state tax liabilities, if any, utilizing certain income and tax rate assumptions. The analysis will include a determination of whether a federal tax election as a small property and casualty insurance company is appropriate. We will address the issues associated with the requirements for risk shifting and risk distribution, taking into account judicial precedent as well as pronouncements of the Internal Revenue Service. We will review the anticipated operating attributes of your captive insurance company and the impact such operations will have on state income, franchise and premium based taxes. As part of this analysis, we will consider the various state jurisdictions that currently regulate captive insurance entities and make certain recommendations from a tax standpoint. Finally, we can give you an estimate of the costs associated with submitting a private letter ruling to the IRS regarding the tax status of your entity, should you wish to have the transaction blessed by the Department of Treasury in advance of operational commencement.

• Identification of Insurance Coverage and Limits – This part of the study will identify specific uninsured property and casualty insurance risks that represent underwriting opportunities for your captive insurance company. We will determine approximate limits for the risks identified and an estimate of the arms’ length premium that will be charged by the captive for insuring such risks as well as any additional capitalization requirements. We will also work with you to determine the nature, source and amounts of third party reinsurance, if any, that may be required to meet the federal tax requirements for risk distribution.

• Documentation of Business Purpose – We will work with you to draft the specific business purpose within your organization for forming a captive insurance company. The formalized business purpose will be incorporated into the business plan for the captive insurance company and will serve as contemporaneous documentation should the IRS questions the captive’s business purpose at a later date.

• Domicile – We will review with you the various domicile options available for forming your captive insurance company. As part of this analysis we will consider onshore versus offshore options for incorporation, ease of incorporation and readily available agents for process, regulatory requirements, geographic proximity, tax issues, administrative ease and other issues related to domicile.

• Structural Issues – We will assist you in determining the proper structure for your captive insurance company (i.e. pure captive versus sponsored cell or other options) and the ownership structure that best achieves your personal, business and estate planning goals. We will also assist you with naming your captive insurance company.

Formation and Licensing

We will assist you with the incorporation and licensing of your Captive Insurance Company in the chosen jurisdiction. Our services in this area will include:

• Preparation of detailed business plan for captive operations;
• Incorporate, Organize, and Register the Captive in the chosen Domicile;
• Retain Registered Agent/Office for Captive in selected Domicile;
• Prepare and File the Captive’s Insurance License Application with Regulatory Authority in Domicile of Choice;
• Facilitate Payment of Application, Registration, Regulatory and Other Fees in Domicile of Choice;
• Obtain Federal Employer Identification Number for the Captive;
• Assist with New Bank Accounts and Investment Management Account Selection;
• Advise on Proper Captive Capitalization;
• Facilitate the Engagement of an Approved Actuary in Domicile of Choice.

Captive Management

Captive insurance companies are living and breathing operational entities. As such, they require substantial day-to-day management of operations. We provide “turn-key” managerial services for your captive which will include the following:

• Underwriting Services - We will provide all underwriting required for the direct insurance risks identified in the feasibility phase of our services. Such services shall include policy contracts, rates, premium calculations and other related services.

• Premium Pricing and Verification – We will work with our established network of underwriters, insurance professionals and actuaries to ensure that the premium pricing for your captive meets arm’s-length pricing standards.

• Regulatory Administration – We will work with the regulatory bodies in the chosen domicile to facilitate policy issuance, renewal, cancellation and administration. We will also file the required reports with the regulatory authority on or before the specified due dates, including the annual report of financial condition, independent auditor’s report and related required documentation, statement of economic benefit to the regulatory jurisdiction, conflict of interest statements and independent third party actuarial opinion. We will facilitate and process the submission of annual fees and other non-income taxes in a timely manner. We will also assist in the administration required for changes in captive ownership and officers or directors. Where required, we will facilitate the process associated with additional capital contributions, distributions or loans from the captive to related parties. We will also facilitate and attend the annual board meeting required by most captive domiciles. In addition, in conjunction with your independent actuary, we will prepare the annual National Association of Insurance Commissioners (“NAIC”) statement.

• Bookkeeping - We will post the bookkeeping entries for the captive related to premiums, loss reserves provided by the independent actuary, investment accounts and operating expenses and maintain the related balance sheet accounts. The financial statements generated from our bookkeeping services are unaudited and the regulatory authority will require that they be annually audited by an independent Certified Public Accountant approved in the domicile of choice.

• Claims Processing – Where allowed under state law, we will assist with the processing of loss claims submitted to the captive by its insured’s. Where state law does not allow for claims processing, we will facilitate the engagement of an approved third party claims processor.

• Premium Invoicing – We will invoice the insured’s on the policies underwritten by the captive and deposit the premiums in the operating bank account when received.

• Reinsurance – We will facilitate obtaining reinsurance and work with the reinsurance providers for your captive.

• Solvency and Capitalization Analysis – When required, we will prepare solvency analyses, analyze free surplus and review capitalization adequacy. These services will be performed in conjunction with your independent actuary.

• Facilitate Audit and Actuary Services – We will assist your captive in obtaining competent independent audit and actuary services and work closely with these selected professionals.

• Monitor Regulatory, Tax and Administrative Pronouncements – We will monitor, notify you or respond to any changes in regulatory, tax or administrative procedures, legislation or other pronouncements that have an impact on your captive.

• Unwinding Services – When the time arrives, we will assist you in the steps necessary to effectively and efficiently unwind your captive insurance company.

Captive Tutorial

A captive insurance company is formed to insure the risks of its owner, affiliates, or a group of companies. It is capitalized with cash and/or letters of credit, underwrites policies for specific risks, receives premiums, makes investments, and where appropriate, pays claims on behalf of its insureds’.

Here are a few basic captive structures that are frequently employed within a middle market enterprise:

Pure Captive Structure

Protected Cell Captive Structure