The Challenge
His property insurance was quoted at $14,000 annually. Through a group captive program, your annual costs directly translate to a shared-stake in the insurance company’s profits every year, with catastrophic exposure covered by stop-loss reinsurance so you’re never on the hook for any downside risk. You pay money in, but then have the potential of your insurance company returning it back. The projected annual return on the property layer is approximately 20% on total premiums paid-in every year, or about $2,800 for his policy. Bringing his net annual out of pocket insurance cost to $11,200.
Our Strategy
Annual resident premium collected: $32,600. After claims and program costs of approximately $19,000, he was left with $13,600 as an annual profit distribution. His residents pay the same $15/month renters insurance charge they did before he acquired the property, their coverage is the same, but the only difference now is where the margin goes. The Combined Picture: Resident layer annual profit distribution: $13,600, Property layer net annual cost: $11,200, Annual surplus of all insurance costs: +$2,400 His combined captive insurance programs now generate an annual net surplus of approximately $2,400 annually, above what he pays in his own total premiums. He is not paying for insurance out of pocket anymore. His own portfolio is paying for it, and returning a surplus to him on top. This is not a theory. It is what a captive model delivers for professionally managed portfolios with better-than-average loss ratios. Not large portfolios or Fortune 500 balance sheet portfolios, just good operators. The structure works at any scale, and it compounds as the portfolio grows. Imagine what the numbers look like at 800 units. Or 8,000.
The Results
