DRDA's Captive Risk Management Plan, or RMaP, is a tool for managing business and financial risk in a more cost effective, tax efficient and protected manner.
The underlying concept of the RMaP™ is fairly straight-forward, but because of the complexity of business, the tax code and insurance regulations, the implementation details can be somewhat confusing at first. The purpose of this article is to provide an overview of RMaP™ services, and to provide some details relating to types, benefits, and taxation.
All businesses have risks. Some of those risks are managed by how you do business (i.e. safety and training programs, requiring letters of credit for overseas shipments, etc.). Other risks are covered by traditional insurance from 3rd party licensed insurance company's (i.e. Travelers, Aetna, John Hancock, etc.). Other risks are retained by the operating company and paid for with savings from after tax profits. The RMaP™ analysis looks at these various aspects of your business and determines the optimum way to manage risks and protect what you have.
One tool often overlooked by small and middle market businesses is the use of a captive insurance company to manage their risks. A captive insurance company is a sister company formed by a business owner to insure in part the risks of the operating business. The operating business pays premiums to the captive, and the captive insures the risks of the operating business. If structured properly the premiums paid by the operating company are deductible by the operating company, and the premiums received by the captive are not taxable if within the limits prescribed by the Internal Revenue Code as discussed below. In the last 30 years the captive industry has grown substantially. From an estimated 1,000 captives in 1980 to over 6,000 in 2009. Captives now account for more than 10% of all commercial insurance premiums collected worldwide. In the U.S. alone, captives were responsible for over $9 billion in premiums in 2009.
Feel free to look around the RMaP information, Resources and then Contact Us by stopping by our Bay Area Houston location or give us a call at (281) 488-2022 for more information or to schedule your appointment today.