What does it cost to run a captive insurance company each year?
The state fee is fixed and the service providers are where the range is
Travis Wegkamp separates the two halves of the annual bill. What the state charges is a flat license fee, not prorated in the first year and renewable before the start of Utah's fiscal year, with a separate flat fee per cell in a sponsored programme. What the service providers charge is not something the department collects, but it publishes estimates: a range for the annual reserve opinion, a range for the independent audit, and a wider range for the captive manager, which he says varies most because management firms do very different amounts of work.
The state's side is the simple half. Wegkamp describes a single annual license fee with no proration on formation, meaning a captive licensed late in the year pays the same as one licensed early. Renewal falls before July, which is the start of the state's fiscal year rather than an anniversary of the licence.
A sponsored programme adds a separate flat fee for each cell.
Key takeaways
Utah charges a flat annual license fee that is not prorated in the first year and renews before July, the start of the state's fiscal year.
The department does not collect what captives pay their providers, so the actuary, audit and management figures on its site are published estimates rather than filed data.
Wegkamp says the management fee varies most because firms sell different scopes, from full underwriting to compliance and bookkeeping only.
The provider side is where Wegkamp is careful about what he does and does not know. The department does not collect what captives pay their actuaries, auditors and managers, so what it publishes are estimates rather than filed figures, and he points to the department's own site for them.
He also scopes them. The estimates are drawn from captives in a band running from about a million dollars of annual premium up to the low tens of millions, which he says covers the overwhelming majority of what Utah licenses. A captive far outside that band should not read the estimates as its own.
From the conversation
Travis Wegkamp
Director, Captive Insurance Division, Utah Insurance Department
“the license fee for a captive is $7,500 in total annually”
Transcript
Read the full transcript 6 turns
Travis WegkampAs far as cost, like I mentioned, the license fee for a captive is $7,500 in total annually. No prorations when you first form. So, when you first form, you've got to pay that $7,500 to get the license, and then it needs to be renewed before July 1 of each year. That's the state's fiscal year, so that's the renewal date
Travis Wegkamp. And then $1,000 for any sales if it's a sponsored program. As far as other costs associated with the just the ongoing maintenance and running of a company, we don't necessarily get or look at that information. We do have some estimates on our website there, the address that I just gave you. Our
Travis Wegkampestimate, and it all depends on size, you know, a captive could be as small as it could be under a million a year in premium, or they could be tens of millions to hundreds and billions even. So, it really depends on your size. These estimates are kind of based probably between a million to 20 some million or something like that, this range. That's that would cover 95% of the captives we have and we see here in the state. So, anyways
Travis Wegkamp, on that on that website, our best guess for an annual actuary doing the reserve opinion would be $5,000 to $8,000 a year. The independent CPA doing the annual audit, eight to 12,000 a year, and then a management firm doing that day-to-day work 30 to 40,000 a year. And again, especially that management one, I think could fluctuate a lot because management
Travis Wegkampfirms offer all sorts of different sort of help and services. They may range from doing out all the underwriting and stuff within that management firm, or it may just be one where they just essentially help keep you compliant with Utah code and do a little less of that actual underwriting and maintenance there and bookkeeping for the captives. So, yeah, expect some variation there, but that's probably a good
Travis Wegkamprange for most captives we see
Citations
Sources
- Captive, Utah Insurance Departmenthttps://insurance.utah.gov/captive
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