PROFIT PARTICIPATION


Risk Partners offers agency partners the industry leading approach to agency captive participation. Our agency partners maximize their income through commissions and profit sharing, while minimizing costs in a simplified process.

For agents having the ability to write $1 million of workers’ compensation premium in select classes of business, Risk Partners provides the opportunity to share 25% of the underwriting profit and investment income on a simplified basis.

Our agency captive reinsurance agreement only requires an initial $5,000 capital contribution. Risk Partners offers to warehouse up to $500,000 of written premium before an agency partner decides whether to move forward with the arrangement. The ongoing capital requirement is only $50,000 for every $1 million of premium. Agency is only at risk for the capital invested or earned, while the upside is unlimited.

The agent continues to receive 100% of their traditional commission plus their full profit-sharing on the portion of business that is retained by agency captive. The agent keeps all of the underwriting profit and investment income returned from their 25% assumed participation. Agents reinsure their individual, hand-selected accounts and the income derived from their participation is distributed as, potentially tax-efficient, ownership dividends.

US Taxpayers making 831 (b) election to be taxed as a “small insurance company” would pay taxes only on investment income until assumed premium is greater than $1,200,000 (equal to approximately $6 million of gross written premium).

Projected Results

  • Version 1: At a 40.0% Net Loss Ratio the initial investment of $50,000 becomes > $450,000 after 5 years
  • Version 2: At a 50.0% Net Loss Ratio the initial investment of $50,000 becomes > $325,000 after 5 years
  • Version 3: At a 60.0% Net Loss Ratio the initial investment of $50,000 becomes > $220,000 after 5 years

In order for the program to break-even, based on the above assumptions, it must achieve a 70% or better Net Loss Ratio.