Phi Initial Presentation 12 17 08

Privately Held Insurance, LLC

Presentation for:

Captive Insurance Entities

What is Captive? Why Create A Captive? Why Offshore and Why Anguilla? Implementation Steps and Timeline PHI Services Recap & Questions

What is a Captive?

Very simply, a captive is an insurance company that you own.

You then use the insurance company that you own to provided insurance to yourself.

The insurance company may provide various types of insurance you now purchase from someone else.

Why Create A Captive?

Reason #1: Make a profit! Reason #2: Create a financial asset. Reason #3: Control cost of risk

As the owner of the insurance company you can make additional money and have more ongoing control of your insurance needs.

Optimal Solution

Profit / Asset Protection: The owner runs the captive to protect the assets in the captive and make money.

Ownership: The owner keeps the premiums otherwise lost to an insurance company.

Control: Captive empowers the owner to control the claim, coverage and cost of risk.

The Captive Structure

ControlOwnership

Profit

Why Offshore?

U.K. law attaches Access to major re-insurers and carrier fronts Limited right of Discovery Not subject to U.S. court jurisdiction No statutory accounting No Yellow Book International generally accepted accounting

principles

Why Anguilla?

Lower regulatory expenses Price Waterhouse performs financial audits No requirement that a board member be a resident Economical annual licensing fees / full transparency Annual actuarial study required Captive Funds may be invested stateside

Captive Formation Steps

0-30 Days

90 – 180 Days

Begin Operations!

CapitalizationFront Company

If Needed

Engage PHI

OrganizationDocumentsPreparation

NameSelection &

Incorporation

OpenBank Account

ReinsuranceIf Needed

Business Plan& FinancialProjections

MeetingWith CaptiveRegulators

File CaptiveApplication

Timeline

30-60 Days

60-90 Days

PHI Role & Strategic Partners

Reinsurance & Fronting – Guy Carpenter Actuarial – Merlinos & Associates Offshore Bank – Safe Harbor Bank Offshore Counsel – First Anguilla Trust Company, LTD. Offshore Auditors - Price Waterhouse Coopers (PWC) Medical Group Benefit – Capitol Administrators of S.E., LLC Claims – Usually Provided by the Fronting Carrier Offshore Captive Manager –Taino Insurance Managers, LTD Onshore Administrator - PHI

Create a Captive Insurance Solution

Reinsurance

Fronting

Risk Management / Loss Control

Compliance & Legal

Treasury & Banking

Accounting

Investment Strategy

Actuarial

Audits

Policy Administration

Claims Management

Captive Management

PHIINSURANCE

ACCOUNTING

MANAGEMENT

PHI manages all your needs to create, operate and grow your captive insurance company.

Build an asset, capture control and add profit to the bottom line!

Captive Models & Structure

Medical: Group health policy. Liability: Self issued insurance coverage. Workers Comp: Self insured mandated coverage. Risk Sharing: Participate in risk of issued premiums.

The captive model has many variations to fit your business. Each provides a vehicle to make a profit, build an asset and provide more control to you.

Medical Group Health Captive

A Medical Group Captive is set up to provide group insurance coverage to your employees.

The group plan can be tailored to fit your individual needs.

Supplemental insurance protects catastrophic losses.

Control of the plan limits your risks and control over cost increases.

A Medical Group Captive provides better coverage to your employees and makes your business more competitive.

Medical Group Example Model

Individual Employee Group PolicyPremiumDistribution

$100K

$1M

$500K

$850K

GroupLimits

$1M

ATRISK

AGGREGATERISK

TOTAL

EmployerContribution

$150KVaries Based on Spec Loss

Coverage Cost

EmployeeContribution

A customized plan that covers the lower risk exposures, provides a long term platform for complete coverage for the employees with a growing and profitable asset.

Employer Owned Life Insurance

Employer issues employee life policy Employer pays premium Employer deducts premium as business expense Employer owns life insurance policy Employer is the beneficiary Employer receives death benefit tax free Employer accrues underwriting profit

Employer Owned Group Life Example

Individual Employee Group PolicyEmployer PaidPremium

$55,000,000

$550,000

GroupLimits

$50,000 Policy LimitPer Each Employee

ATRISK

AGGREGATERISK

TOTAL

Employer issues employer owned life insurance policy insuring employees. Employer pays premium, owns the policy and receives death benefit tax free.

Example1,100 employees; $550,000 total annual premium

Liability Captive

You currently pay huge premiums to an insurer. Insurers keep all the profit and interest. Insurers use your funds to pay your claims. When you work hard to control losses, the outside

insurer benefits.

A Liability Captive is simply an entity set up to issue your own liability insurance policy to yourself.

Liability Coverage Example Model

Individual Claim Policy Premiums

$250K

$850K

ATRISK

PremiumIncome

$1M PerOccurrence

Policy Exposure

$1M

$3M PolicyAggregate

Limits

AGGREGATERISK

TOTAL

$1.35M

Reinsurance

Captive liability coverage combined with a solid risk reduction strategy provides a model for rapid growth of the captive assets. Controlled risks provide immediate and significant profit.

Workers Compensation Captive

Workers Compensation insurance is mandated coverage you must purchase.

Insurers keep these funds unless claims occur. Insurers keep all the profit and interest. Insurer issues the policy to comply with statutory

requirements.

A Workers Comp Captive can be used to issue your own mandated coverage, limit your risk and profits from proper business controls.

Workers’ Comp Example Model

Individual Claim Annual Exposure Policy Premiums

$250K

$750K$680K

$1M

StatutoryLimits

StatutoryLimits

ATRISK

ATRISK

TOTALPremiumIncome

As with the liability model, the worker’s comp model provides a model for rapid growth of the captive assets and the potential for immediate and significant profit.

Risk Participation in Issued Policies

You are collecting huge premiums for insurers. Insurers make money on premiums collected by

deferring tax, making an underwriting profit and accruing interest on investments.

The captive shares risk on the policies issued by taking a sliver of risk and a portion of issued policies premium.

A captive company allows you to participate in the risk and profit from writing good business.

Risk Participation Example Model

IndividualClaim

Total Premiums

$50K

$1M

Per OccurrenceLimits

ATRISK

PremiumIncome

Total WrittenBook

$1M

$10M

ATRISK

TOTAL

$10M

The risk participation model provides a long term growth opportunity to participate in a profitable book of business with proper risk distribution.

PHI Orchestration Role

Captive Setup

Investment Plan Setup

OngoingAdministration

Off ShoreIncorporation

CaptiveLicensure

BankingSetup &

Relationship

OperationalCaptive

Captive ModelAnalysis

Policy / PlanDesign

Filings &Regulatory

Setup

Financial /TreasuryTransactions

Back OfficeAdministration

Audits &Loss Control

ActuarialAnalysis

Financial Filings& Compliance

PHI manages the entire life cycle of the captive and provides continuous monitoring and adjustments as needed.

Captive Insurance Opportunity

A Captive insurance entity provides your business a financial asset and an additional profit source.

Anguilla provides reasonable cost structures. The Captive provides additional controls and

insight to make your core business more profitable.

PHI Complete Captive Management

A successful captive is dependent upon two key elements: Proper design and execution of setting up the

captive. Competent ongoing oversight and

management of an extremely valuable asset. PHI fulfills this role and keeps you informed.

PHI Manages the Captive Cycle

OngoingAdmin

PlanDesign

Setup