CASH FLOW MANAGEMENT SYSTEMS
FOR REINSURANCE COMPANIES
INSURING HIDDEN RISK
Most business owners unknowingly self insure a large amount of risk. Many of these are hidden or “below the surface” risks inherent in the operation of a business.
Any material risks can be insured.
If insurance claims are as projected, the reinsurance company (captive) will retain profits that can be distributed to its owners.
For many years, large corporations have used alternative risk transfer strategies to reduce insurance costs, improve risk management. With the growth of small property and casualty insurance companies, these benefits are now available to middle market companies, as well as groups and associations.
For sophisticated companies, managing and financing risk become important aspects of overall business strategy. A PORC insurance company is the premier risk management and risk financing tool.
We invite you to review this website and contact us to discuss how your organization can obtain the benefits of a captive insurance company or other alternative risk transfer vehicle.
As with other insurance company structures, properly-formed PORC have many asset protection benefits.
Conventional insurance typically provides little incentive to improve risk management, as there is no participation in the profitability of the insurance program. However, with a PORC, the business will benefit from good claims experience. A PORC provides strong incentives to improve risk management throughout an organization.
Insurance companies follow special rules with respect to taxes. Statutory tax benefits are available to all insurance companies, including PORC's. Tax benefits alone, however, should not be the reason behind establishing a captive insurance company.
Cash Flow Benefits / Investment Income
Apart from pure underwriting profit, PORC's earn investment income on the premiums received. Premiums are typically paid in advance while claims are paid out over time. The PORC retains control over the premiums and surplus.
Cost Reductions / Capture Underwriting Profit
Typically 35% - 50% of the premium paid to a commercial insurer goes to overhead and profit.
Unavailability of Coverage
Where the commercial market is unable to provide coverage for certain risks (including warranty, reputation, or product liability), or where the price quoted is unreasonable (such as medical malpractice or construction defect).
A PORC insurance company is less vulnerable to the cyclical nature of hard and soft markets that affect the conventional insurance market. Thus, a PORC can aid a business that requires accurate financial projections.
PORCs CAN LOWER THE COST OF TRADITIONAL P&C INSURANCE
Once a PORC captive has been established, the business owner (insured) can self-insure their uninsured and under-insured risks. it is common for the insured business to adjust premium and deductability with their commercial P&C.
Call one of our representatives to explain a use case where one of our clients saved more than $900,000 in this real market scenario.