CIC Services is pleased to announce that it has increased the potential net commercial insurance premium reduction available to mid-market companies in its Bundled Captive Insurance Program from 40% to 50%.Continue Reading
What is “The Uber Claim,” and why on earth is a Single-Parent Captive Insurance Company “Central” to mid-market or small businesses?
I routinely educate business owners, CEOs, CFOs and Risk Managers about captive insurance and the power of self-insurance and Alternative Risk Transfer (ART).
First, I explain the power of “owning your own insurance company,” and the benefits of avoiding the “sunk costs” – CLICK HERE TO LEARN MORE – of commercial insurance.
Second, I usually explain that their self-insurance through a captive insurance program is strongly backed by a reinsurance / risk pool or a commercial reinsurance carrier. The point is that self-insurance via a captive doesn’t have to expose the business to unnecessary risk. Meanwhile, self-insurance through a captive insurance arrangement enables a business or business owner to be rewarded for good risk management practices and capture insurance profits in an insurance company owned by the business owner or business – powerful!
Third, I’m usually asked the pivotal question or questions:
“What happens if my captive insurance claim is denied, or if my loss is not insured by my captive?”
It’s always worth noting that captive insurance policies may be written more broadly than many commercial policies. This can reduce the number of policy exclusions for which a claim may be denied. Nevertheless, captive insurance claims must still be administered at “arm’s length,” and this may result in the denial of a claim. Or, there may be unexpected losses that arise that simply aren’t addressed by an insurance policy – commercial or captive.
Now What?
The very survival of the business may hinge on addressing an unexpected, uninsured loss.
Fourth, this is where I normally introduce “The Uber Claim.”
The ability to make an “Uber Claim” provides the ultimate peace of mind. The captive owner can:
AND
This is the “Uber Claim,” and it is the ultimate survival vehicle for mid-size and small businesses.
Finally, I often explain the benefits of a Single Parent Captive versus a Group Captive, and these are quite obvious. Group Captives have their place, but Single Parent Captives have far more flexibility to support the needs – even the immediate needs – of the business and business owners. Group Captives can’t execute the “Uber Claim.” Single-Parent Captives can. This is why Single Parent Captives may indeed be “Central” to the success and very survival of a business, while – at best – Group Captives help control costs and trickle back money over time for good performance and loss controls.
To discuss any questions you may have about risk management and captive insurance companies, contact the CIC team today!
As reported in Captivating Thinking earlier this year, by a vote of 2-1, a three judge panel of the United States Court of Appeals for the Sixth Circuit ruled against CIC Services, a captive insurance manager who was seeking an injunction prohibiting the IRS from enforcing IRS Notice 2016-66 (the “Notice”). The Notice designated certain types of captive insurance transactions as “transactions of interest” and imposed onerous filling obligations upon thousands of taxpayers across the country. Those obligations are enforced by steep penalties for failure to file, which the court amounted to a “tax”.
CIC Services has filed a Petition For Rehearing En Banc with the United States Court of Appeals for the Sixth Circuit. The Petition is powerful, compelling, provides layers and layers of case law and precedent and outlines the significant public interest that this case represents (EG the usurping of the Administrative Procedures Act and the door it opens to abuse of all citizens be the growing administrative state).
To download the petition, click here.
As we have previously noted, the issue at hand—that is, whether or not the IRS can, unlike any other federal agency, continue to systematically enforce obviously illegal regulations just because they are enforced by an illegal “penalty tax”—is much larger than just captive insurance or just Notice 2016-66. Indeed, it involves fundamental issues of liberty, fairness and separation of powers. For those reasons, CIC Services will continue its fight on behalf of taxpayers everywhere.
Remember that CIC Services Principal, Sean King, JD, CPA, MACC, had previously noted that, “We are delighted that Cameron Norris and William Consovoy with the firm of Consovoy Mccarthy have recognized the extreme importance of this case and are joining with our external counsel in this matter, Adam Webber, and with the Supreme Court Clinic at the Antonin Scalia Law School at George Mason University, to press this matter forward.” Mr. Norris clerked for Judge Henderson on the D.C. Circuit, and both Mr. Norris and Mr. Consovoy clerked for Justice Thomas on the Supreme Court.
Mr. King also noted that, “We are confident that a majority of the judges on the Sixth Circuit will understand the extreme public importance of this issue and will resolve the matter in a manner consistent with the Supreme Court’s 9-0 Direct Marketing decision upon which our case relies.”
Captive insurance companies are often misunderstood by mid-market business owners, CFOs and their trusted advisors. The result for many is an unnecessary vulnerability in a complex marketplace and operating environment with ever-shifting risks. In its June 2019 issue, CPA Practice Advisor (CPAPracticeAdvisor.com) has published a definitive article on captives titled, “Protect & Build Wealth Through A Captive Insurance Company,” authored by Randy Sadler, Principal at CIC Services.
Randy discusses many threats mid-market businesses face and outlines the “third-party insurance dilemma.” He also proposes “a better way – blending third-party insurance with formal self-insurance.”
To read the entire article in CPA Practice Advisor, CLICK HERE and flip to pages 8 and 9.