accessing your captive’s surplus
TRANSCRIPT
![Page 1: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/1.jpg)
ACCESSING YOUR
CAPTIVE’S SURPLUSBruce C. WhitmoreSenior Captive Consultant
![Page 2: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/2.jpg)
Bruce C. Whitmore
Senior Consultant
Willis Towers Watson
S2 |
SPEAKERS
Julie E. Robertson
Partner
Honigman
Suzanne Sadlier
Deputy Head of Insurance
Cayman Islands Monetary Authority
Accessing Your Captive’s Surplus
![Page 3: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/3.jpg)
• Forms of Distributions
• Distributions by type of entity
• Purpose of the distribution
• Adhere to the Principles of Insurance
• Respect the Process
• Ramifications of Improper Distributions
• Q & A
S3 | Accessing Your Captive’s Surplus
![Page 4: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/4.jpg)
• Policyholder Dividends (rewards the insured)
• Stockholder Dividends (returned to owner)
• Retrospective Rated Balances
• Premium “Holidays” (offset cash flows)
• Risk Management Grants (investments in loss reduction efforts)
* U.S. Income Tax ramifications will differ by type of structure, ownership & distribution
S4 |
FORMS OF DISTRIBUTIONS*
Accessing Your Captive’s Surplus
![Page 5: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/5.jpg)
• Release excess surplus to parent for reinvestment (to achieve higher ROI)
• Shore up parental shareholder or insured cash balances
• Offset uninsured loss at the parental level
• Offset current or future premium payments
• Distribute profits to captive’s beneficial owners
• Allow the captive to insure a wider array of risks
• Reward good risk management efforts
• Fund new risk management programs
S5 |
WHAT IS THE PURPOSE OF THE DISTRIBUTION?
Accessing Your Captive’s Surplus
![Page 6: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/6.jpg)
• Premium “Holiday” is a misnomer
• Premium credits should be actuarially determined
• Should not excessively erode surplus
• Evidence clear management consideration
• Additional lines/coverages should be priced appropriately
S6 |
ADHERE TO THE PRINCIPLES OF INSURANCE
Accessing Your Captive’s Surplus
![Page 7: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/7.jpg)
• Determine the amount of the distribution
• Weigh the timing & tax impacts*
• Select the form of distribution
• Request regulatory approval (as required)
• Obtain approval from the Board
• Memorialize distribution appropriately in captive documents
• Process the distribution accordingly
* Consider recent changes in U.S. tax code, as tax ramifications will differ by type of structure, ownership & distribution.
S7 |
WHAT IS THE PROCESS?
Accessing Your Captive’s Surplus
![Page 8: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/8.jpg)
S8 |
REGULATORY REQUIREMENTS
Accessing Your Captive’s Surplus
Approved dividend policy?
NoPrior approval
required
Yes
Is the proposed distribution
permitted per the approved
dividend policy?
No
YesNotification to
CIMA
![Page 9: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/9.jpg)
Accessing your Captive’s SurplusS9 |
1) Prior approval for changes to the dividend policy:
a) Reason for the change
b) Funding and the loss reserving policy
c) Latest management accounts
2) Prior approval for a dividend payment where there isn’t an approved dividend
policy:
a) Proposed amount
b) Intended timing of distribution
c) Latest management accounts
3) Prior notification only (where a dividend policy has previously been approved
and the dividend is within the scope of the dividend policy:
a) Confirmation that the dividend is in accordance with the policy
b) Proposed amount
c) Intended timing of distribution
d) Latest management accounts
REGULATORY REQUIREMENTS
![Page 10: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/10.jpg)
Accessing Your Captive’s SurplusS10 |
RAMIFICATIONS OF IMPROPER DISTRIBUTIONS
![Page 11: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/11.jpg)
Bruce C. Whitmore
Senior Consultant
Willis Towers Watson
S11 |
KEY TAKEAWAYS
Julie E. Robertson
Partner
Honigman
Suzanne Sadlier
Deputy Head of Insurance
Cayman Islands Monetary Authority
Accessing Your Captive’s Surplus
![Page 12: ACCESSING YOUR CAPTIVE’S SURPLUS](https://reader030.vdocuments.net/reader030/viewer/2022040312/624774ad8b87f13b7622cafb/html5/thumbnails/12.jpg)
www.caymancaptive.ky
THANK YOU!