Most people are content to use traditional insurance policies provided by old-fashioned insurers. If not, then at least they resign to the fact that there is no other option.
However, there are other choices for insurance that may appeal to certain people seeking insurance policies that better suit their needs, or offer additional value. Captive insurance could fall into this category. It is for anyone interested in going off the beaten path.
If you have already made wise financial decisions like setting up accounts with a reputable trust company in Anguilla, perhaps you are the type of go-getter who seeks captive insurance. You just need to understand the potential risks and rewards before you make a decision.
What is Captive Insurance?
The first thing you need to know is that this type of insurance exists when the insured owns the company. In other words, every policyholder is an owner of the insurance company. They grant some measure of control and decision-making ability, and able to share in profits. Unfortunately, they also share in any loss.
This is opposed to commercial insurance, where the company sells a product (i.e. policies). The clients choose the product that most closely suits their needs, and the company earns profits. Captive insurance allows those it insures to tailor policies to their particular needs as long as the captive operates within sound actuarial and regulatory guidelines.
Potential Rewards
Perhaps the best thing about captive insurance is that it offers the opportunity for the insured to create policies tailored to their personal needs. Since traditional insurance companies offer only policies that are ill-suited and overpriced, captive insurance could be the best solution.
There is also potential for greater earnings. Captive insurance companies have far fewer expenses than traditional providers. Price stability is achieved over time as the captive matures and expands risk retention capability. Therefore, even though they often start with less capital, they have greater latitude to invest and earn. Plus, underwriting profits go to owners, which in other words, is you.
Potential Risks
Captive insurance has many potential rewards, but there is also a risk factor. Those insured under its policies are owners of the insurance company. This is based on investment. If there are no claims against these policies, a surplus will grow and owners will earn money through underwriting costs.
Significant claims can put investment funds at risk. On the upside, captive insurance companies generally start by reducing underwriting costs before dipping into a surplus. In addition, the inherent obligation to limit losses means that the companies generally have a greater focus on safety and risk reduction than the average commercial insurance company. However, the old adage “no risk, no reward” aptly applies to captive insurance.
In short, captive insurance is about professionals e.g.Investors, lawyers, doctors, nurses etc. pooling together to sustain or dampen the effects of losses mainly due to litigation.
For more information on Captives and how to form them, ask us today at First Anguilla Trust Company Limited.
How to set up an Offshore Trust Fund for your children
If you are reading this article, I’m willing to bet that you are a person who loves your children and wants them to always be taken care of throughout the entirety of their lives. As we all know, everyone’s time spent on earth will eventually run out and we will one day leave our families behind. As grim as this may sound, it’s the reality that we all live in.
People often turn to setting up a trust in order to care for their family after they pass on. If you set up a proper trust, you can ensure that your children have access to your assets long after you have passed on. Read on, to learn exactly how to set up a trust fund.
What are you putting into your Trust?
The very first step of setting up a trust is to identify what exactly you want to add to the trust. Typically, people will add stock options, savings, real estate titles, patents, bonds and any and all financial assets that they have. What you put into your trust is what will be passed along to the beneficiaries (your children).
Identify a responsible Trustee
So who is it going to be? Who is going to be the person or institution that will be the trustee of your trust and assets? As you probably already guessed, in order to set up your trust for your children, you need to decide who will be the trustee for the family trust. A trustee in this context is a person or institution that has the responsibility of managing the funds in your trust until your child is ready to use it for say education or when he or she becomes an adult and has access to the trust.
That being said, it’s in your best interest to only assign the role to someone you trust, such as financial advisor, lawyer or trust company that helped to create your trust for you. Additionally, there are plenty of trust management firms that you can use to manage the trust for you. This can be a great way to ensure unbiased management.
Transfer your assets
Our goal in this step is to simply set up a trust or trust account with a Trustee such as; First Anguilla Trust Company Ltd, so that you can have all of your assets in one place. Some people simply set up a new banking account; some people choose investing companies. Several people also chose to create trusts in other jurisdictions like Anguilla, which has the advantage of low taxation. Our recommendation is speaking with your financial advisor before you physically set up a trust in order to make a more informed decision. Please keep in mind that your trust funds must be separate from any other account that you may have.
Get legal
This is where the rubber meets the road; in this step, our goal is to make your offshore trust fund legal.
You will want to meet with your trust manager, attorney and/ or financial advisor in this step and legally draft your trust. A good trust team (attorney, trust manager and financial advisor) will explain the different types of trust you can set up and explain the benefits of each option. Essentially, when this process is concluded, you will have a legal document that will state, the purpose of the trust, responsibilities of the trustee, beneficiary of the trust and instructions to the trustee as to how the trust should be managed.
Congratulations, you have set up your first offshore trust fund.
