Captive Insurance Program

Ownership. Control. Profit.Cover your business risks.

Keep all of the profit.

A captive insurance company is an insurance company owned by the business (or multiple businesses) that itinsures. Because the owner of a captive insurance company obtains insurance directly from its captive, theowner is able to reduce its dependency on expensive insurance products offered by the commercial market,as well as obtain coverage for risks not generally commercially available. This means that the business payspremiums to an insurance company that it owns. The owner can manage the investment of its premiums,gain from the profit, recover unused premiums, and take advantage of the tax benefits. This provides amechanism for the business to retain substantial dollars typically lost to an outside insurance company.

There are numerous reasons to form a captive insurance company, including the ability to reduce insurancecosts bymanaging risk, significant tax benefits, wealth accumulation, favorable distribution rules, and retentionof key employees. One key feature of a captive insurance company is the ability to insure against risks forwhich commercial insurance is not readily available. A business forming a captive insurance company cantailor the risks assumed by the captive to meet the needs of the business. This provides the business greatercontrol over its risks and a more cost-effective method of obtaining necessary insurance protection.

The ConceptCover your business risks... Keep all the rewards.

How Captives WorkProvide insurance directly to your company.

Captive StructureOwnership. A captive insurance company is owned by its insured.

Control. A captive insurance company enables the owner to control coverage, claims and the cost of risk.

Profit.The owner operates the captive to protect its assets and make money.• Protect your company against loss of income by insuring risks for which commercial insurance is not generally available.• Retain profits in your captive instead of paying them to an unrelated insurer.• Stop subsidizing commercial insurance companies that use your premiums to pay claims that aren’t yours.

A captive insurance company is formed primarily for the purpose of insuring or reinsuring the property andcasualty risks of its parent or affiliated companies. While captives have been around for over forty years,they generally have been used by large companies. However, they are increasingly becoming a valuableplanning tool for the successful small to mid-size market.

As the cost of commercial insurance has increased, a captive insurance company is a way for a business tomore effectively manage its risk and to provide for protection against loss. By forminga captive insurance company, a business can take advantage of substantial federal andstate income tax savings and use those savings to fund other business opportunities.

A captive insurance company is essentially an “in-house” insurance company createdfor the primary purpose of insuring the risks of its parent and/or affiliatedcompanies. It generally does not market its insurance to the general public. Acaptive insurance company is an alternate form of risk management that is becoming a more practical andpopular means through which a business can control its insurance needs and protect itself financially.

SSiinnggllee OOwwnneerr CCaappttiivveeA Property and Casualty Insurance Company is capitalized byCompany A for the purpose of insuring risks of Company Aand/or its affiliates. There are complex risk diversificationguidelines that the captive must follow.

CClloosseellyy HHeelldd IInnssuurraannccee CCaappttiivveeA Property and Casualty Insurance Company is capitalized byCJA (“CJA P&C Company”). CJA P&C Company has two classesof stock. CJA owns 100% of the Class A Common Stock. TheClass B Preferred Stock will be available to companies obtaininginsurance coverage through CJA P&C Company. Because noinsured can own more than 15% or less than 5% of the Class BPreferred Stock of CJA P&C Company, there must be at leastseven participants in the Class B Preferred Stock of CJA P&CCompany. CJA P&C Company is subject to the same riskdiversification rules as Single Owner Captives.

• Premiums paid to captive may be tax-deductible

• Captive may be established off-shore

• Off-shore captive may elect to be taxed as a U.S. Corporation

• Annual premiums up to $1.2m may be received by captive tax-free

• Retain profits otherwise lost to commercial insurancecompany

• Profits may be taxed as dividends

• Recoup investment at capital gains rate

• Offers opportunities for asset protection

• Creates opportunities for wealth transfer

• Insure risks not generally accepted by commercial carriers

• Offers greater opportunity to control risks

• Control the investments of the captive

• Reduce premiums by managing risk

Key Advantages

The CJA Captive ProgramTwo simple ways to set upa Captive Insurance Company.

Establishing A CaptiveInsurance Company

From initial phone interview to issuinginsurance policies, CJA manages the entire

process of establishing a captive.

1. CJA will conduct a preliminary interview to outline the program and determine the interest and viability of establishing a captive insurance company.

2. A formal engagement letter with CJA will be executed.

3. CJA will conduct a feasibility study to assess insurable risks and determine insurance needs.

4. CJA will prepare all organizational documentation required to establish a captive insurance company, as well as all forms and applications for an insurance license that must be submitted to regulatory authorities.

5. CJA will shepherd applications for an insurance license through the regulatory review process, and provide all information requested by the regulatory authority.

6. Upon issuance of the insurance license, CJA will prepare the required corporate resolutions. A capital contribution will then be made to the captive insurance company and shares of the company will be issued.

7. Once the type of insurance coverage to be offered by the captive is determined, CJA’s actuaries will calculate the premiums for such insurance coverage. CJA will perform underwriting for these risks.

8. CJA will create the necessary insurance contracts and will submit the contracts to the regulatory authority for approval.

9. CJA will invest the assets of the captive, as directed by the owner of the captive. The regulatory authority will require the captive to maintain a certain solvency ratio. The owner of the captive is responsible for selecting investments that will maintain this solvency ratio.

10. CJA will prepare and submit all applications for insurance and annuity contracts held as assets of the company.

11. CJA will obtain reinsurance when necessary.

12. CJA will administer the business of the captive insurance company, including issuing insurance policies and collecting premiums.

888.599.5553 � Phone: 239.298.8210 � Fax: 239.298.8211 � email: cja@cjamarketing.com � www.cjamarketing.com791 10th Street South, Suite 202 � Naples, Florida 34102

CJA is a national employee benefits company. We specialize in the

design and administration of innovative employee benefit plans for

the small business and estate planning market. With over thirty-five

years of experience, our actuarial, marketing, legal and administrative

experts, position closely-held companies to take full advantage of

customized benefit plans and tax leverage. CJA is one of the leading

third party administration firms in the country. Our exclusive

relationships with highly rated insurance carriers, allows us to offer

unique planning opportunities to our clients.

CJA has regional offices located throughout the United States to

offer local support for your planning needs. Our focus is on

customized solutions for small business owners that fully comply with

the tax code and create planning tools for businesses to use their

dollars more efficiently.

For more information, please contact us at 888.599.5553 or visit us

on the web at www.cjamarketing.com.

CAPTIVE INSURANCE DONE RIGHTAbout CJA & Associates, Inc.

A Higher Bracket

CJA