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Reinsurance Basics

  • Producer Owned Reinsurance Companies (PORC) must be viable predicated on a certain volume
  • Minimum volume (VSC) 25-30 contracts monthly or 300 to 350 contracts annually
  • Discussion on the volume for GAP AND ANCILLARY PRODUCTS must be done on a case by case basis
  • PORC can assume 1.2 Million of risk/premium (non-life insurance) i.e. P&C risk/premium

Benefits

  • ASSET RETENTION can remain in the corporation indefinitely
  • Lowest tax rate for any corporation
  • Cash disbursements are subject to Capital Gains taxation. Loans are also another alternative

Expenses/Fees

  • Formation of the PORC is about $3500 for a onetime initial cost
  • Accounting, tax return, and charter fee amounts to about $2,500 annually which is deducted from the reserve pool
  • Fees per policy ADMIN, INSURANCE, etc. (VSC)

1120 PC CORPORATION

  • Corporation is formed as a CONTROLLED FORIGEN COORPORATION
  • EIN TAX ID NUMBER is applied for and a US TAX RETURN is filed
  • There can be several shareholders of the corporation

TAXATION

  • A ONE-TIME election to pay taxes either on the investment or the underwriting profit?
  • This election is a permanent election 


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