PERC

PERC

insureCap’s Private Enterprise Risk Captive (PERC) is a specialized form of captive insurance company. It’s designed to address non-traditional, currently uninsured risks, allowing businesses to effectively manage and insure against these unique exposures. A PERC, when structured properly, can operate under the guidelines of IRC 831(b), which pertains to small property and casualty (P&C) insurers. This designation allows PERC captives to enjoy specific tax advantages and regulatory requirements, differentiating them from self-funded programs.

Goals of PERC Captives

The primary aim of establishing a PERC is for a company to take control of your insurance and risk management objectives. This proactive approach allows businesses to:


  • Pre-fund real self-insured risk: Allocating funds in advance for known risks, providing financial stability and readiness.

  • Solve the Uninsured & Underinsured Problems: Offering a solution to coverage gaps in traditional insurance markets by insuring risks that are otherwise difficult to cover.

  • Retained shareholder equity: Enhancing financial efficiency by keeping more funds within the company or its ownership group, rather than paying premiums to external insurers.


PERC Benefits

The advantages of utilizing a PERC for risk management and insurance are multifaceted, including:

  • Favorable Tax Treatment: Leveraging IRC 831(b) for potential tax savings on premiums received by the captive.

  • Control of Risk: By insuring themselves, companies gain greater insight into and management over their risk profile.

  • Minimize Insurance Costs: Potentially reducing insurance expenses by avoiding the traditional insurance market’s pricing structures.

  • Wealth & Funded Loss Accumulation: Building a financial reserve that can grow over time, providing a buffer against losses and a potential source of wealth accumulation.

  • Efficient Transition to Other Captive Structures: Offering a pathway to evolve the insurance strategy as the company’s needs change, moving to more sophisticated captive arrangements when appropriate.

Conclusion

In summary, a Private Enterprise Risk Captive (PERC) provides businesses with a strategic tool to manage unique risks through self-insurance, offering financial benefits and greater control over their risk management programs. This approach not only addresses the challenges of uninsured and underinsured risks but also contributes to financial efficiency and the potential for wealth accumulation within the structure of the captive.