We now offer the lowest cost high quality captive design, formation and management services available anywhere. Click here to read our white paper loaded with valuable information including our fees compared to others.
We believe an informed client and transparent working relationship are essential to good long term business relationships.
NOTE: The cost estimates below are not necessarily reflective of the fees and costs you will incur if you engage us. They are representative of typical established captive industry service providers.
A feasibility study typically comprises the initial expense to determine if a captive makes sense for your situation. We sometimes do complimentary preliminary captive assessments. Independent feasibility studies cost from $4000 to as high as $50,000 or more for complex captive projects. Feasibility study expenses are often applied against formation costs.
Captive formation fees vary widely. We offer all-inclusive calendar formation year design, formation and management services from as little as $25,000 for a US licensed pure captive. Without cutting any corners; in fact guaranteeing highest quality service. Offshore or hybrid captive structures may available for even less.
Historically captive formations were done by specialized law firms. Frequently today captive managers include formation services with management services. The average all-in formation year fees generally range from $35,000 for very simple small captives to $75,000 or more.
Formation services for the increasingly popular enterprise risk captives (also known as “micro-captives” or “831(b) captives”) from a top 10 global captive manager typically run in the $50,000 all-in formation year range compared to our comparable if not superior services for far less.
There is no reason for you or your clients to pay these higher fees when we offer similar if not higher quality service for less. If however you decide a larger overhead firm is needed for your captive verses our high performance boutique firm, we joint venture projects with leading large management firms at no additional cost to you. In fact, we likely will save you money verses you going directly to these firms as we have a close relationship with them, know their pricing structures and thresholds, and insist our client referrals get best available pricing.
Click here to visit our formation page for more information.
Net annual management fees typically cost $20,000 and up, with a net fee of $36,000 annually for a top 10 management firm typical for enterprise risk micro-captives. We offer all-inclusive management of pure captives for as little as $30,000 per calendar year. Visit our marketing flyer page for more information.
Selecting a top firm does not mean you will be assured of getting top services. Large firms have large staff teams and you may or may not get the level and quality of service you anticipate. Sometimes smaller firms offer the best service levels. This is similar to domiciles whose success often causes an erosion in the quality of that relationship due to staff shortages or lack of new staff training. The same situation happens with larger captive management firms. It is not easy for successful captive management firms to scale, and find qualified staff to maintain service levels as they grow. Large firms also are not as willing to accommodate smaller cases, or invest time to develop special captive applications.
Some hybrid captive programs are offered for smaller captive design applications with all-inclusive management fees priced as a % of premium, typically 8% or more, with a minimum floor to cover expected costs and sometimes a annual maximum as well.
For a pure US domiciled captive the costs on top of the net management fee run approximately $20,000 annually for domicile fees, audits, tax returns, actuarial work and local agent fees where the captive is domiciled outside the state of its owners insured business operations.
Assuming a $3,000/mo net management fee arrangement, with typically normal and required expenses, the annual operating costs will approximate $56,000 exclusive of fronting fees, risk pooling fees, 3rd party administration fees, periodic examination charges, taxes, legal fees and other costs that may be applicable depending on the type of captive, its design and the activity during the year.
We offer top shelf comprehensive management, including all normal operating costs, for far less than this. Contact us today for a free consultation.
Start-Up Capital Considerations
In addition to service provider and domicile fees and costs required to form and operate a captive, the owner must make a sufficient investment in the capital stock of a captive to meet statutory licensing requirements and help assure the captive’s ongoing solvency.
Pure captives in the US generally require between $125,000 and $250,000 of initial start up capital. We have banking relationships interested in offering letters of credit in lieu of cash capital accepted by all leading domiciles we work with. This enables starting up a captive program with far less cash investment than otherwise possible.
Offshore pure captive capital requirements vary from a low of $10,000 to in excess of $150,000 depending on domicile and type of captive.
Hybrid captive entities such as cell and series captives often have capital requirements not governed by specific regulatory rules but by the manager’s policies. Generally speaking if the hybrid captive is subject to US taxation, it should start with not less than a 5:1 ratio of premiums to capital, and strive to meet a 3:1 premium to capital ratio by its 2nd operating year with earned surplus considered.
Alternatives to Depositing Cash to Meet Capital Requirements
Capital requirements can be met by depositing cash, or often by alternative methods. For example a captive owner posting a letter of credit facility in lieu of cash is allowed by most domiciles. Also common today is use of a qualifying “114 Trust.” Collateral trusts products have benefits over letters of credit including:
- The trust is usually significantly less expensive than an LOC
- The income from the trust is the property of the depositor
- The assets in the trust generally remain on the books of the depositor
- The trust is a widely accepted form of collateral in the insurance, captive, reinsurance, corporate deductible, and ILS industries
- The draw-down characteristics are similar to those of an LOC
- Unlike the LOC, the trust does not need to be renewed each year, eliminating the time and effort needed for the LOC renewal process