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ADVANTAGES OF
RENT-A-CAPTIVES
One advantage of rent-a-captive is that they do not
require users to contribute capital to them, although users do pay a fee to
the captive manager that typically runs from 1% to 3% of the gross written
premiums placed in the captive. A rent-a-captive parent may have
hundreds of cells. The losses and
expenses of each segregated cell is protected from the losses of any other
cell. In a Protected Cell structure
the assets of a given cell are legally separated from those of all
other cells in the Captive as enacted under the laws of a number of U.S.
State and Off-Shore Jurisdictions.
Thus the bankruptcy or liquidation of one cell does not imperil the
assets of any other. There are a number of reasons that
a Business Owner or Professional may want to organize a Parent captive or set
up a segregated cell captive in a Group Captive, such as; to provide coverage
not now available from Commercial Insurance Companies, to obtain rates for
the business or the professional that are better for preferred risks, or to
accommodate an insured that would like to assume a greater portion of its own
risk. For example someone may want to
assume $200,000 of its own risk, however, as a deductible or self-insured the
business or professional can only take a business expense when a claim
is paid. If the self-insured or
deductible is placed in a segregated captive for the business owner or
professional the insurance premium paid to the Cell Captive can be deducted
from the business or professionals income. The before tax contribution to the
self-insured captive can be invested as allowed under insurance company
investment laws. The earning of the captive can be earned tax free thru
contributions to the Surplus of the company, up to a maximum dictated by the
state of domicile and the risk assumed. Risks assumed by the Captive can be for; life, health,
liability, employee benefits, property, workers’ compensation (on a
restricted and approved basis), occupational accident coverage for
non-mandated workers’ compensation persons, and other creative Risk Transfer
uses. |
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F. Darrell Lindsey |
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