Costs of Formation

The following is a list of the various fees and professional services and expenses for a basic "pure" start-up captive. 

 

Formation costs should generally not exceed 8-10% of first-year premiums (assuming a full $1.2 million captive) and quite often are below $100,000.

 

There are limited economies of scale when utilizing multiple captives, and the same goes for the benefit (or lack thereof) of only a captive which has less than $500,000 in annual premiums.  Most of the costs below are fixed.

 

A detailed breakdown of the fees associated with your start-up with be provided upon completion of the feasibility study.  Prior to that time, however, it is impossible to determine with absolute accuracy the level of professional services that will be required.

 

Captive Formation
A List of Fees, Professional Services and Expenses
for a Pure Captive












Services
Feasibility Study       no fee
Audit

      10,000
Actuary       10,000
Captive Formation Services       25,000
Administrative Services       no fee

Legal and Compliance Review

      10,000 

Services Subtotal

      55,000
   
Other Expenses
Insurance License/Premium Tax (1)
        4,000 
Annual Insurance Exam (accrual) (2)        3,000
Total      62,000
   
   
(1) This fee is due by March 1, 2010 and each March 1 thereafter

(3) The State of Kentucky requires an insurance exam every three years (which probably can be extended to five (5) years that will be billed directly to the captive insurance company.  The costs of this exam will be in the range of $7,500 to $15,000.  Therefore, the cost should be accrued on an annual basis, which would be $1,500 to $3,000, in addition to the above costs.







































































         


         


         


       














     


         









         









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