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Business Risk Management

Tax Savings Today by
Implementing Business Risk Management
Through Privately-Owned Insurance Company

  • Minimize Insurance Cost
  • Customized Premiums
  • Insulation from Market Fluctuation
  • Asset Protection Without Offshoring
  • Wealth Building
  • Third-Party Actuaries Determine Risk
  • Increased Control Over Claims Management
  • Significant Profit Potential
  • Fees Half the Cost of Competitors
  • No Restrictive Trust Agreements
  • Full Insurance Company Support 
  • Control Risk

Do You Qualify for a Privately Owned Reinsurance Company?


Minimize Insurance Cost

We minimize operational costs by unbundling services and reducing overhead.  These savings go straight back to the Privately-Owned Insurance Company’s bottom line.

Customized Premiums

Traditional insurers develop premiums based on industry averages and state rates.  We use the insured’s individual loss history to determine a custom premium.

Insulation from Market Fluctuation

As a Privately-Owned Insurance Company owner, you could be less susceptible to the ever-increasing and unpredictable costs imposed by conventional insurers.

Asset Protection Without Offshoring

Our privately owned insurance company client’s newly created insurance company is domiciled in tribal sovereignty versus a foreign country with regulatory conditions.  Our client’s insurance company is domiciled with a Native American tribe and is never subject to state regulations and respective fees/taxes.  Our clients enjoy tribal sovereignty. 

Wealth Building

Our clients remit tax-advantaged premiums into their newly-formed entity, which they manage with turnkey support.

Third-Party Actuaries Determine Risk Assessment

A third-party actuarial firm will determine your insurable business risk.

Increased Control Over Claims Management

Our process focuses on driving claims to closure and lowering costs.  As such, member-owners are actively involved in claims administration.

Significant Profit Potential

Privately-Owned Insurance Companies can return unused lost funds in the form of dividends.  Members can also earn investment income on capital and cash collateral.

Fees are Half the Cost of Our Competitors

On average, our representative model is 1/2 the cost of competitors.  Our modest flat rate percentage represents professional administrative services, including compliance, accounting, year-end tax filing, investment consultation, loan structuring, loan processing, and claims management.

No Restrictive Trust Agreements

We do NOT use a Trust, Trustees, or a Trust Agreement. Unlike other Reinsurance service providers, clients’ tax-advantaged premium funds reside in the FDIC bank of their choosing. The client has 24/7 access to his/her monies and determines the signees on the respective bank account.

Full Insurance Company Support

We fully support our Privately-Owned Insurance Company clients— from risk control and safety services to claims advocacy, finance, investment, underwriting, accounting, meeting facilitation, and more.

Control Risk

Our Privately-Owned Insurance Company clients devote significant time to loss prevention to help members improve risk control methods and reduce factors commonly leading to losses.

Type of Insurable Interests:  Brand Protection, Dispute Resolution, Business Interruption, Audit Assurance, Political Risk, Data Breach, Third-Party Business Interruption, Employer Liability, Key Employee Loss, Accident or Critical Illness, Representations & Warranties, Credit Default, Directors & Officer, Coinsurance Penalty, Recall Assurance, Supply Chain Interruption, Professional Liability and many more.

Businesses That Typically Benefit
Any successful business, including;

Agriculture

Construction

Dental & Medical Practices

Manufacturers

Professional Services


Retail

Self-Storage Facilities

Service Businesses

Technology Businesses

And more…

 

Frequently Asked Questions

Quick and efficient answers to common questions about our services and processes.

These terms represent alternative risk management tools and are often used interchangeably in the marketplace. An 831(b) Plan, a Micro Captive Reinsurance Company, or simply a Micro Captive, Privately-Owned Reinsurance Company (PORC) and a Privately-Owned Insurance Company (POIC) most often refer to a small insurance entity eligible for unique tax advantages in alignment with the U.S. Internal Revenue Code. Such entities are taxed solely on their investment income rather than the premiums collected up to a specified threshold. These tax structures are particularly advantageous for small to medium-sized enterprises seeking to enhance their risk management strategies with tax-deferred funds and asset protection. 

Why Micro Captive? Over the last few centuries, the term ‘Micro Captive Insurance Company or Privately-Owned Reinsurance Company (PORC) was derived from it being a smaller version of a traditional Reinsurance company, which elects under the 831(a) Tax Code and caters to much larger enterprises to insure traditional risks. In contrast, Micro Captive or Privately Owned Reinsurance Companies were designed to cater to the needs of smaller businesses, providing a cost-effective way to insure against risks that might be too expensive or impossible to cover in the conventional Reinsurance market. In recent years, preferred structures known as Privately-Owned Insurance Companies (POICs) have evolved to follow all compliance measures while providing business leaders with a strategic alternative risk management tool.

PRIMARY BENEFIT: MITIGATE RISK MORE EFFICIENTLY

Traditional insurers cover a large portion of the risks business owners face (think General Liability and Workers Comp). However, as many business owners learned during the COVID-19 pandemic, their policies are often limited and exclude certain risk coverages. There are also many losses that insurers will not cover. A Privately-Owned Insurance Company mitigates the risks business owners take daily, whether they realize it or not. Stated another way, a Privately-Owned Reinsurance Company helps ‘fill in the gaps’ relative to business leaders’ risks and helps cover those uninsured or under-insured risks. 

SECONDARY BENEFIT: TAX-DEFERRED PLAN CONTRIBUTIONS

A Privately-Owned Insurance Company (POIC) allows a business owner to defer income to address tomorrow’s risks. Without a POIC, business owners are self-insuring risks, such as a business interruption, with after-tax money from cash flow. With a POIC, business owners can utilize these tax-deferred reserves to weather the storm when catastrophe strikes.

Setting up a POIC involves a structured four-phase process

  1. Discovery & Education: Initial meetings are held to understand your company’s profile, explore specific needs, and educate you on the benefits and setup of a POIC.
  2. Risk Analysis: This phase involves analyzing your company’s risks and devising a long-term risk management strategy, including determining appropriate Reinsurance coverages. This exercise often involves a licensed, third-party actuary. 
  3. Implementation: The plan is formally established, including deciding its ownership structure and company name, and you will engage a professional representative to purchase necessary Reinsurance coverages.
  4. Monitoring & Adjustment: Continuous monitoring and communication ensure the plan remains aligned with your business growth and complies with regulations, with adjustments made as necessary.

Costs include an initial setup fee, an annual maintenance fee, and a retained liability premium. LTRS strives to offer a transparent fee structure without hidden fees. These fees include: 

  • Initial structure design
  • Preparation of plan documents and risk assessments
  • Application, POA, and transaction approvals
  • Monitor compliance with applicable rules and guidelines
  • Compliance filings of 8886, 1099-DIV, and meeting minutes
  • Annual tax return
  • Claim services
  • Loan services
  • Accounting
  • Annual renewals
  • Ongoing client consulting

A POIC is meant to fill in the gaps of traditional insurance, not replace it. Policies can be written for uninsured and under-insured risks that are often intangible and include brand protection, reputational risk, dispute resolution, business interruption, audit, political risk, cyber liabilities, third-party business interruption, employer liability, key employee loss, representations and warranties, credit defaults, directors and officers, supply chain interruption, subcontractor default, professional liability, recall, storage custom warranties, protection plans, deductible reimbursement, dental warranties, tenant rent protection, accidental damage warranties, contract default and more.

831(b) Plan reserves are held in a C-Corp that elects under the 831(b) tax code, which, as of 2024, allows for up to $2.8 Million (figure adjusted for inflation) in annual tax-deferred contributions (subject to contribution limits) and has a yearly inflation rider adjustment. Investment income and realized gains from plan reserves are taxable at the C-Corp rate. Dividend distributions taken by shareholders are taxable to the individual at the qualified dividend rate.

In this similar structure (closer to traditional 831(a) insurance transaction), POIC-related premium is not limited to the $2.8M cap. In a POIC, the policy’s premium reflects the numerical representation of identified business risk and often reflects 10% – 20% of the business’ top-line revenue. Like the 831(b) election, investment income and realized gains from investments are taxable at the C-Corp rate. Dividend distributions taken by shareholders are taxable to the individual at the qualified dividend rate. See the actuarial example of a Construction Company business owner: The policy will reflect the identified line item risks (in this example, Administrative Actions to Subcontractor Default), and the premium is capped at $1,579,738. This represents roughly 10% of the business’s top-line revenue: $15,000,000.

The IRS is vigilant about potential abuses in this space. They look for signs of non-compliance, such as premiums that aren’t set at arm’s length, lack of genuine risk distribution, or PORCs/POICs that don’t operate with the characteristics of a genuine Reinsurance company. LTRS has developed a stringent Four-Part Test to ensure compliance with its administration’s POIC structure. The IRS has previously identified specific micro-captive or PORC structures as “transactions of interest,” signaling their intent to monitor and potentially challenge perceived abuses. As part of the annual maintenance fees, LTRS ensures that all clients follow regulatory requirements without the disclosure requirement by adhering to IRS Rev. Proc 2025-13.

To maintain compliance and avoid potential IRS challenges, businesses should partner with an advisor/administrator who follows the Four-Part Test stringently. This ensures genuine risk distribution and risk shifting. In addition, premiums should be set at arm’s length, reflecting actuarial-based risks and actual market rates. It’s also crucial for the structure to operate like a genuine Reinsurance company. Engaging experienced professionals in establishing and managing your private insurance structure is imperative to ensuring compliance.

A POIC offers a tailored risk management solution. Businesses can fill coverage gaps by insuring against specific risks not covered by commercial insurers, ensuring they are protected against a broader range of potential losses. This can lead to improved cash flow management, asset protection, and more predictable financial outcomes, incentivizing businesses to invest in loss control measures, as they directly benefit from reduced claims.

The business owner or stakeholders typically own the POIC. While they exert control over their operations, the POIC must operate independently of the parent company to maintain its status as a separate Reinsurance entity. 

The business leader or a trusted advisor can manage premium (and/or plan reserves) to fit a participant’s risk tolerance and investment goals.

Absolutely. A POIC complements a business and can be tailored to meet specific risk management and financial needs. Business owners can select from many plans to fill gaps in current policies and cover risks not addressed by traditional insurers. 

LTRS understands the complex lives of business owners. POICs are meant to bring efficiencies to our client’s business and limit disruptions. As the plan’s administrator, LTRS ensures the plan meets the four-part test and achieves the business owner’s risk mitigation goals. LTRS has a defined process to assist business owners through plan implementation and ongoing plan maintenance

Filing a claim for a POIC is easily accomplished with the associated carrier/provider. In the event of a claim, the POIC functions similarly to a traditional insurer, adjusting and then paying out the claim. An insurance claim is a formal request by a policyholder to an insurance company for coverage or compensation for a covered loss or policy event. The Reinsurance company validates the claim (or denies the claim). If it is approved, the Reinsurance company will pay the insured.

Claims can be submitted online using the claim form. Once the claim form is submitted, the claim will be opened. The Reinsurance company will contact the policyholder in the next couple of business days to begin the claim process.

A POIC can positively impact cash flow. Premiums paid to the POIC are tax-deductible. Additionally, if claims are lower than expected, the net underwriting profits can be reinvested or distributed to the shareholders, benefiting cash flow. However, it’s essential to manage the POIC effectively to ensure its financial health and the broader financial health of the parent company.

While POICs can benefit a wide range of businesses, those with unique risks not covered by commercial insurance or those in industries with high insurance costs can particularly benefit. Industries like agribusiness, automotive, healthcare, hospitality, construction, financial services, manufacturing, legal services, real estate, storage, service industry, retail, technology, and transportation, among others, have found significant value in POICs.

A POIC provides stability against changes in the commercial insurance market by allowing businesses to self-insure and set aside tax-deferred funds for risks not covered by traditional insurance. This self-reliance is crucial, especially during the current hardening of the property and casualty (P&C) market, where premiums are rising and coverage options are becoming more restrictive. As insurers exit specific markets, businesses can use POICs to manage risks like data breaches, supply chain interruptions, business interruptions from pandemics, deductible reimbursement, and many more uninsured or under-insured risks. This ensures they maintain cash flow and avoid relying on unpredictable government bailouts. By customizing coverage, these plans offer a more reliable alternative to traditional insurance.

Absolutely. Remembering that 92% of Fortune 500 companies use some form of Reinsurance, a growing number of small business leaders seek to be educated/set up a POIC to provide stability against changes in the commercial insurance market and effectively self-insuring uninsured and under-insured risks inherent to any business operation. Business leaders state the benefits of PORCs and POICS include a) more significant control of risks, b) mitigation of claims, c) improved cash flow, d) asset protection, and e) wealth building (investments). By adopting a PORC or POIC structure, business leaders are augmenting risk coverage in addition to their traditional property and casualty insurance, enhancing business resilience in volatile market conditions.

Yes. Consider the global reinsurance market, which represents roughly $800 billion (Gallagher, 2023) and is trending by double digits (e.g., the reinsurance market increased by 12% from FY 2022 to 2023). In our lifetime, it is expected the global Reinsurance market will top one trillion dollars as smaller and smaller – mid-cap businesses adopt alternative risk strategies; this movement is ‘amplified’ by the fact that commercial P&C carriers are either removing coverages or pricing coverages at a rate not congruent with the needs/capacities of business owners.

                                                             Here’s how our in-depth process works.

Discovery & Education

We begin this stage during our initial meeting when we get to know one another.  We focus on understanding your company and if we are in a position to add value by mitigating risks.  We also want to educate you by explaining the benefits of owning a Privately-Owned Reinsurance Company and how you may start one.

Risk Analysis

The primary objective of this stage is to analyze the risks present in your company further and to develop an effective, long-term strategy to manage those risks.  Part of the long-term risk management strategy will be referring your company to our Direct Writer.  Utilizing the information gathered in Phase I, our Direct Writer will determine the appropriate insurance coverages and premiums to be charged.

Implementation

This phase’s primary objective is to form your privately owned insurance company fully.  Essential aspects of this phase are determining your private insurance company’s ownership structure and company name.  During this phase, you will also engage our direct writer agent to purchase insurance coverage(s).  Using constant communication and a highly skilled staff, we strive to make this process quick and easy for you.

Monitoring & Adjustment

We diligently monitor our clients’ Private-Owned Reinsurance Company.  We stay in constant contact with our clients to ensure that the objectives of the Private Insurance Company align with the client’s current needs and with regulatory standards.  When we discover that a client’s circumstances have changed, we quickly make necessary adjustments.

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