The first ART was formed in Canton Ohio in the mid 1950s. ARTs are time tested and virtually every Fortune 500 company using an ART to manage their insurance risks, coverage and pricing. ARTs are better known as Captives. Most people have a misconception of what a captive is and how they work. In short a captive is nothing more than an insurance company. Captives underwrite, collect premium, issue policies and pay claims just like any traditional insurance company. The difference is that in our program the captive is owned by the insured. These are called Single Parent Captives. Please note that there are many different types of captives, single parent just being one of them, and the one we prefer.

Since captives are insurance companies they can share in the underwriting profit of the premium (total premium minus losses equals underwriting profit). In our program the single parent captive can recoup from 10% up to 50% of the underwriting profit.

In 1986 Congress added to the IRS tax code a provision for captives to recoup underwriting profit at a zero tax rate. The single parent captive simply selects an 831 (b) tax designation and all of the underwriting profit, up to $2.3M per year is tax free. Obviously, any funds generated as interest income on those funds are taxable against the captive and when dividends are issued to owners, the owners are responsible for the dividend or long term capital gains tax of between 15-20%. The10 year average return for a captive is in excess of $8.5M.

The IRS is very clear that the sole purpose of a single parent captive cannot be the tax advantages. Generally, this is not an issue because a captive provides many other advantages for the parent insured. Control over coverages, language, risk management, claims handling and pricing are all added advantages a captive provides that are just not available in the traditional insurance model.

Please contact us to answer any questions you might have or to obtain a quote about our Bundled Single Parent Captive Program.  We have included some frequently asked questions for you below.

Frequently Asked Questions

Generally speaking the qualifications are a company generating $5M or more in gross revenue, spending $250,000 or more on their P&C premiums (including Property, General Liability, Professional Liability, Crime, Cyber, D&O, EPLI, etc, but excluding Workers Comp, Commercial Auto, and Healthcare), and the insured must have a good loss history with a long term plan for their insurance needs.

Captives in the past have been designed for large corporations, thus the use by almost every Fortune 500 company.  Our program has designed a way to minimize the expense of starting and maintaining a captive effectively making it available to small to mid-size entities.  Additionally, most agents are unfamiliar with how a captive works as they have only been trained in traditional insurance model.

Yes, like any insurance company there are restrictions as to what we can insure by industry and the limit of coverage by line of insurance.  From and industry standard we do not write Automobile Manufacturing, Railroad Operations, Pharmaceuticals, Safety Critical Auto Parts, Offshore Oil Operations, Cannabis/Hemp Trade or Ancillary Products, Firearms or Munitions, or Oil/Gas Refining.  We have limitations of lines of coverage:  Medical Malpractice, Workers Comp and Commercial Auto.  As you can see by this risk the types of industry and the lines of coverage are very broad.  We are presently working with the following:  Two Large Law Firms, Multiple Automobile and Boat Dealers, Golf Course Maintenance Company, Chain Restaurant, Winery, Large Aerosol Manufacture, Numerous Non-Profit Private Colleges and Universities as well as others.

No.  The captive works as a layer of insurance between the insured’s deductible and a traditional insurance company.  As an example an insured might have a $5M policy limit with a $50,000 deductible.  The captive is formed and for example sake takes the first $250,000 of exposure.  If a claim is reported the insured still has the first $50,000 of deductible the pay, the captive pays the next $250,000 and then the traditional insurance company pays any expenses and indemnity above those, up to their $5M limit.

Carriers recognize from the example above that by moving their “burn rate” from $50K to $300K they have significantly reduced their exposure.  Additionally, since only good risks can qualify, they are willing to share the profits with the captive.  The parent company now has more of an incentive to properly manage their risk.

Yes, unlike many captives where the carrier has to be found and placed over the captive, our program already has a carrier.  So our program is a plug and play program.  Our carrier is well known in the industry and the general public and has an A. M. Best rating of A+ Excellent.

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