A Delaware captive insurance company is usually established by a parent company (or owner) to insure its risk and those of affiliated organizations or groups. Because they are managed and owned by a policyholder (or several), they are called "captive companies", and recent U.S. taxation provisions allow them to claim tax deductions on the premiums they accrue during the year, which then go back to the parent company. Since it can be a somewhat complex process to establish and maintain a small insurance company to take advantage of these benefits, hiring a financial management company is generally recommended. These captive managers, offer a variety of services that are necessary to evaluate, form, and manage a captive for their client companies.
Doing a feasibility study is usually the first step in establishing a captive company, since it shows how it can best service the parent company. This could include identifying and classifying company insurance risks, analyzing different risk transfer solutions, drawing up a plan to form and manage a captive, summarizing insurance coverage, premium levels, risk retention amounts, capital, allocation of funds, and financial projections for a captive.
When forming the captive, the management company will take care of any financial fronting, reinsurance, tax problems, accounting, or other related issues. They will also take care of anything required to obtain licensing, like filling out and filing documents, supervising incorporating the company, contacting and setting up service providers, paying any fees required in the process, communicating with insurance regulators and providing documentation they require, and other similar tasks.
Managing a Delaware captive would include handling accounting, taxes, underwriting policies, regulatory compliance, and similar services. This ends up being the long term work and bulk of the total workload, which saves the parent company hours of manpower and headaches.
Handling all the accounting for the captive company would include preparing balance sheets, outlining of what filing for a section 831a or section 831b captive insurance tax break would mean for the company, and making up an extended business plan with detailed financial statements. Handling tax related issues like preparing a customized management report, preparing NAIC filings, coordinating services with retained professionals, arranging annual exterior audits, preparing tax returns, and extensions would also fall under this category. Underwriting and policy issuance would also be included. This means that they would determine premium levels and coverage options, underwrite any insurance risks, coordinate with ratings methodology professionals, prepare applications, declaration pages, confirmation of coverage documents, policy forms, insurance binders, premium payment notices, and other related documents. Regulatory compliance involves reviewing and monitoring brokerage, banking and financial statements, quarterly financial reviews, annual reviews of insurance and corporate legal requirements, intermittent reviews of solvency, meet capital adequacy and asset allocation requirements, and preparing annual financial compliance reports.
Doing a feasibility study is usually the first step in establishing a captive company, since it shows how it can best service the parent company. This could include identifying and classifying company insurance risks, analyzing different risk transfer solutions, drawing up a plan to form and manage a captive, summarizing insurance coverage, premium levels, risk retention amounts, capital, allocation of funds, and financial projections for a captive.
When forming the captive, the management company will take care of any financial fronting, reinsurance, tax problems, accounting, or other related issues. They will also take care of anything required to obtain licensing, like filling out and filing documents, supervising incorporating the company, contacting and setting up service providers, paying any fees required in the process, communicating with insurance regulators and providing documentation they require, and other similar tasks.
Managing a Delaware captive would include handling accounting, taxes, underwriting policies, regulatory compliance, and similar services. This ends up being the long term work and bulk of the total workload, which saves the parent company hours of manpower and headaches.
Handling all the accounting for the captive company would include preparing balance sheets, outlining of what filing for a section 831a or section 831b captive insurance tax break would mean for the company, and making up an extended business plan with detailed financial statements. Handling tax related issues like preparing a customized management report, preparing NAIC filings, coordinating services with retained professionals, arranging annual exterior audits, preparing tax returns, and extensions would also fall under this category. Underwriting and policy issuance would also be included. This means that they would determine premium levels and coverage options, underwrite any insurance risks, coordinate with ratings methodology professionals, prepare applications, declaration pages, confirmation of coverage documents, policy forms, insurance binders, premium payment notices, and other related documents. Regulatory compliance involves reviewing and monitoring brokerage, banking and financial statements, quarterly financial reviews, annual reviews of insurance and corporate legal requirements, intermittent reviews of solvency, meet capital adequacy and asset allocation requirements, and preparing annual financial compliance reports.
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If you find a financial management company that takes care of these details, you are on the right track. To find out more about management services and captive businesses, click on Delaware captive and also best Delaware captive.
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