Detailed captive insurance company cost components with line item estimates can be found below.
If you work with us, we guarantee the highest quality services at the lowest possible costs.
Our free captive assessment provides design and cost estimates.
The major cost components associated with designing, forming and operating a captive are:
- 1st Step - Preliminary Design & Cost Assessment (often free): Contact us to get started;
- 2nd Step - feasibility study ($7,000+): This fee is usually applied toward formation costs if you decide to form your captive ( click here to learn more);
- 3rd Step - Actuarial report (usually included with feasibility study fee) : generally required to apply for an insurance license - very valuable to independently support policy selection, premium pricing and loss reserves);
- Formation and Management fees: (turnkey services from $20k and up 1st calendar year) this varies widely (as does quality) between managers and typically runs in the $45k to $65k or more annually for even relatively simple captives without fronting arrangements or TPAs, etc.);
- Domicile related fees and taxes: often included in turnkey formation and management fees and varies widely;
- Resident director and registered agent fees: Usually included in turn-key management fees;
- Initial Required Start-Up Capital Contributions: For US reporting captives should be at least 20% of initial premium levels. Minimum statutory requirements for licensing can be viewed here by domicile.
- Initial premium payments (this is up to the owner and the captive based on coverage designed and approved by the underwriting and actuary teams and licensing authority - this risk assessment and design area is the most difficult to do well - IRS audits often focus on this policy selection, pricing and related risk pool structure area);
- Ongoing Captive Manager Fees: These vary widely from $1,000 to $5,000 monthly net of costs;
- Risk Pool Fees - generally a % of premium (may or may not be required depending on your business profile): The type and structure and operation of risk pools vary widely, as does the quality of the applicable pools. Some pools and risk sharing arrangements may not past muster if and when tested. If you are being told you need a pool, who you decide to work with matters greatly as no two risk pool programs are alike - we offer risk pool evaluation services;
- Tax Returns: Usually paid separate and performed by a CPA or attorney and cost between $1,500 and $4,500 annually for small captives;
- Claims management fees (3rd party administrator): For small captives most managers include this service with the monthly management fees, however larger captives generally have a separate TPA that usually charge a % of premiums with a minimum retainer. Sometimes legal and other unknown costs may be incurred in connection with claims activity that is never included in base flat management fees;
- Audit fees (these vary widely and often depend on quality of management);
- Investment Adviser (discretionary): Usually a % of assets today but sometimes transaction commission based;
- Accounting expenses and fees (usually part of turnkey captive management services);
- Organizational and periodic regulatory examination fees (sometimes absorbed by domiciles but these can be costly and time consuming for both the manager and the captive client - chose your domicile partner carefully as this is a major consideration);
- Taxes (most domiciles that license captives, and potentially the domiciles where the covered risks are located, often assess some form of premium taxes, excise taxes, or income taxes - self procurement taxes are an area of great controversy many managers often do not even discuss with clients or address the exposure in engagement agreements);
- Meeting expenses (many domiciles require an annual meeting in their jurisdiction);
- Other administrative expenses; and
- Claims payment on covered losses.
Note: For the lowest possible costs associated with forming a small insurance company, Contact Us today. We guarantee the highest quality service at the lowest reasonable fee for both new captives and take over projects.
