The typical captive manager provides the same services as PHI. They also try to provide fronting,
reinsurance, actuarial and
other related services, which creates a significant
overhead and fixed cost. PHI believes that it better serves you to bring experts to the table that work
with and have professional practices targeting specific functions and expertise. Traditional captive
managers are incapable of staying abreast of all the changes or maintaining the right
reinsurance market relationships. Our strategic partner, RRISC, a leading reinsurance provider, specializes in this huge field.
They provide the very best and current approaches to the reinsurance markets in a way no other captive
manager can begin to match. This is what they do and their knowledge and expertise will save your captive
money.
Many actuaries exist and are capable. Merlinos and Associates, another strategic partner of ours,
goes a step further. They provide high
priority and immediate response to questions and situations when they develop. Their reports fit your
specific captive needs and design instead of receiving a boilerplate report that may or may not fit your
needs and concerns. They provide you human capital that understands your specific captive's parameters
and learn your risk tolerance and views.
PHI understands that using strategic partners instead of using an "in house" approach avoids any
conflicting interest or the possibility of a future problem involving disclosure. Our strategic
partners work for you independently of PHI and PHI works independently of them. This insures all
viewpoints are available to your captive. PHI believes this approach is reasonable and prudent.
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PHI will improve your property and casualty coverage or reduce
these costs OR WE WILL WAIVE AND RETURN THE FEE!
PHI provides consulting services on any existing captive or cell structure you may already have.
We look at the structure, evaluate the expenses and fees, and determine how it is operating
for you. We can then make recommendations on how you might improve the existing structure.
Commercial Insurance & Employee Benefit Audit Service
Captive owners have other insurance policies for risks outside the captive. PHI offers a complete
review, audit and bid package as an optional part of our captive service or independently on an ala
carte basis. Any business owner paying more than $150,000 in premium will benefit from this value
added service through "tuned up" insurance programs, improved coverage, and reduced premiums. Savings
may be substantial.
The insurance industry has too often engaged in business practices that have burdened unsuspecting
commercial buyers with high prices and inadequate coverage. Business owners may find insurance confusing,
unclear and difficult to measure. PHI offers you a unique service to make certain that insurers and
producers compete to earn your business. PHI applies this service to the lines of business you select.
The process includes the following steps, PHI will:
- Meet with you to learn how your business operates.
- Review your financials.
- Audit your existing coverage and policies.
- Contact all providers to insure that you have retained them to perform a coverage audit.
- Request loss runs from current and past carriers on all lines of business.
- Assemble a bid specification book using their unique approach and system.
- Work with you to develop a list of prospective insurance bid specification recipients.
- Notify bid recipients and assigns each the markets they may use.
- Provide constant counseling and all the work necessary to work with the carriers and agents to assure
smooth and peak performance leaving you free to run your business.
- Maintain control over the markets each participant may approach.
- Receive and review the bids.
- Review and explain the results with you and enable you to make determination of coverage,
participant, and carrier.
- Provide transition counseling through implementation of your decision.
- We are optionally available for an annual update and triennial bidding of your insurance. PHI believes
that you should consider bidding your insurance using PHI once every three years to insure that you
maintain the best coverage at the lowest available price.
We know our approach will provide you significant improvement in either the group benefits or property
and casualty programs. The results generated are often astounding. If we are unable to improve your
property and casualty coverage or reduce these costs then we will waive and return the fee. For employee
benefits, we will guarantee you will receive every option available at the lowest possible cost.
Please contact PHI for a proposal of service. Our approach makes you money by lowering and improving
your insurance costs and plan design!
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Avoid Cell Captives
Many captive managers and almost all domiciles provide cell captive options. These are potentially very dangerous to your financial well-being and are best avoided. Their proponents represent them as easy and economical ways for you to enter the captive universe. They claim that cell captives avoid the capital requirements, have a lower start up cost and provide most of the same benefits to you that a regular captive provides. Most recently, a new and deadlier version has gained popularity that promises to avoid all tax events until the funds return stateside.
Cell captives are potentially deadly for you for the following reasons:
- Cell captives do not require any capitalization but they do require Letters of Credit equal to the amount of risk taken by the cell less premiums paid into the cell. A cell captive assumes no risk because it has no assets. Cell captive have limitations on investments and hidden fees and expenses that work to nearly offset any interest that may accrue on the premiums paid into it. There is very little, if any, interest accumulation.
- Cell captive premiums do not qualify for the business expense tax deduction because risk transfer is absent and risk transfer is required to claim the deduction. The cell captive has no financial asset and may assume no risk. The risk is fully funded by the letter of credit (LOC) you provide and the premium you pay. If challenged, the business deduction may and probably will not qualify.
- Distributions and profit are at the option of the cell captive host. He determines when or if to distribute profit to you at his sole discretion. He may send profit to you at an inconvenient or expensive moment tax wise for you. You have no control.
- You may only take the profit as cash or as a premium reduction. You may not keep excess funds in the cell captive. The cell captive may not contain any capital.
- You may not write multiple lines of business in a cell captive. If you want to add another line of business you must place it in a separate cell.
- LOCs remain forever and increase in amount. This may restrict the amount left on your credit line for other business needs. LOC s are permanent liabilities on your financial statement. Off shore cell captives sustain a second LOC charge. This double charge for LOCs results because off shore regulators will require a separate set or "back to back" LOCs issued by a local bank to satisfy their regulations. This doubles your LOC cost and requires you to satisfy two LOC holders instead of one and pay two separate LOC premiums.
- Captive cell premium is invested by the captive host locally. You have no control where the funds are kept or the fees charged against them.
- Are you liable for adverse results encountered by another cell captive? The answer is unknown. This has never been determined by a court having competent jurisdiction.
- What happens if the captive host is forced into bankruptcy? Are your funds protected from his creditors? Courts have never ruled on this.
- If you decide to close the cell captive what is the exit strategy and when or how do you receive your funds? When may you close the LOCs? This is at the discretion of the cell host and they may have little incentive to let go of your funds. There is no incentive for prompt or effective action. They receive fees for as long as they hold your LOCs and premium.
- The cell captive provides no ownership benefit. The cell is not a financial asset, you can not run it as a business and the profit opportunity is limited and often not within your control. Cell captives are bank accounts with your funds in them but controlled largely by another.
- Cell captives fail to provide you control, very little profit, and no financial asset. PHI will help you remove your company from such a structure if you currently have one.
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