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THE REINSURANCE MARKET

A GROWTH STORY

 

If you don’t have an alternative risk transfer program in place, you may soon be in the minority. Insurance industry trends indicate that most middle market businesses will implement an alternative risk transfer strategy over the next few years. In fact, 92% of Fortune 500s use some form of reinsurance. 

 

Self insurance dates back to the 1600s and became a strategic business strategy in the 1900s surrounding the Industrial Revolution. Significant reinsurance platforms were formed in Bermuda in the early 1960’s, and then formalized in the late 1970’s with a medical malpractice insurance structure for Harvard University. In 1986, President Ronald Reagan/Congress passed formal legislation into law. 

 

In recent years, the growth of reinsurance and related risk transfer mechanism has boomed driven by businesses seeking to better manage insurance dynamics including risk mitigation, premium cost, cash flow, claims, asset protection, service and capacity.

 

According to data from S&P, the 2023 US reinsurance market was valued at $198.23 billion. It's expected to grow to $630.10 billion by 2034, with a compound annual growth rate (CAGR) of 11.09% from 2024 to 2034. 

FEASIBILITY STUDY

EXPANSION TO

MIDDLE MARKET

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Today, this popular risk mitigation platform is used by Fortune 500 companies to capture insurance premiums and underwriting profits. With reinsurance, large organizations can insured general liability, worker's compensation, auto and property insurance. These structures soon become a profit center for the entire organization.

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Until 2001, IRS regulations largely restricted middle market businesses from using reinsurance. However, in 2001, 2002 and 2005, the IRS issued guidelines that provided “safe harbors” for middle market companies. These new rulings have opened the door to many third-party insurance companies being operated in all 50 states.

 

In alignment with President Ronald Reagan's vision to serve small to mid cap American businesses, reinsurance has become a strategic and practical risk management tool surrounding risk mitigation, asset protection and cash flow management. 

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Glass Buildings
“My reinsurance company gives me better control of mitigating company risks while building premium in my POIC structure. This has been an excellent business decision” — Tara K.
“I want to thank you for the gift of communicating the benefits of a reinsurance company...it has allowed me to react to the Coronavirus crisis from a place of compassion and not out of self preservation”— Andy M., DDS

What Business Leaders Say...

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A privately owned insurance company (POIC) is a closely held insurance company established primarily to insure the uninsured and under-insured risks of a company and affiliated groups. Insureds are involved in operations which include: underwriting, policy placement, claim decisions, investments and annual strategies for the insurance company.

 

Private insurance and alternative risk transfer planning involves sophisticated insurance and risk management planning (e.g., actuarially based policies), company formation with select domiciling entities, regulatory and compliance documents, and a wide range of accounting, financial and taxation specialties. This planning is specific to each set of circumstances. It is not appropriate to apply general information described herein to any particular situation. The formation of a private insurance platform is a part of a client's implementation of alternative risk transfer planning. As a result, this planning should not be undertaken without a competent team of professionals who have extensive experience in private insurance and alternative risk transfer planning. Prospective Clients and any Interested Party should seek the advice of knowledgeable legal counsel and tax professionals to answer any questions related to their specific needs. The information herein is general in nature and may not be relied on for any specific use. The content herein (including graphics) does not purport to show all details and complexity in establishing a compliant private insurance platform or alternative risk transfer program. Reinsurance Specialties (and/or its affiliates) is not engaged in rendering legal services or advice. Disclosure under IRS Circular 230: the information and services offered are not intended to and do not comply with the US Treasury Department's technical requirements for a formal legal opinion and cannot be used by a taxpayer to avoid any penalty that might be imposed on a taxpayer. Nothing herein may be used in promoting, marketing or recommending any one specific investment plan or arrangement.

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