How to Handle an Insurance Review

When you establish a captive insurance program for your business through Venture Captive Management, you should be aware that we arrange for annual insurance audits for our clients. At Venture Captive Management, we see these annual reviews as part of our management and fiduciary responsibilities.

Understanding the “why” behind the annual audit process and knowing what to expect can help you understand the importance we place on the review process. insurance review

The Purpose of Venture Captive’s Annual Audit Process

We understand the positive impact establishing a captive insurance program can have on your business, and we want to make sure you are set up for success. Think of your insurance review as a verification process to ensure things are set up and working correctly, rather than as something to be feared or dreaded.

In addition to ensuring the captive insurance company is in compliance with IRS and SEC financial standards and requirements, insurance audits are also designed to protect businesses from related issues that could arise if there are questions about insurance program payments or reimbursements. For example, businesses in the health care industry who receive Medicare and/or Medicaid payments need to be able to validate that their insurance structures are in compliance with all applicable laws.

What to Expect From the Audit Process

Your captive insurance company must first and foremost be a functioning insurance vehicle, rather than just an investment/profit center for your company. In addition to reviewing financial records and documentation, the audit process seeks to confirm the company meets that requirement.

Items confirmed during annual insurance reviews include verification that:

  • All payments from the captive insurance program are supported by a contract and an approved invoice
  • Phone conversations are documented with follow-up emails
  • Meeting notes are approved by our clients
  • Securities valuation processes for the structure’s investments are appropriate and reflect a fair value, for each security held
  • Third-party administrators (TPAs) undergo regular audits of their internal controls
  • TPAs have detailed records of loss expenses paid, reserves, reserving methods, expenses payable, etc.
  • Actuaries are licensed and specialize in the line or lines of coverage offered through the captive insurance program
  • If the actuarial firm’s statement shows a range of values, the captive owners must submit a statement documenting their rationale for maintaining a reserve number

How Our Clients Benefit from Annual Insurance Reviews

While it’s easy to think of an audit in purely negative terms, there are several benefits to the annual audit process.

First, having audited financial statements will be helpful in your business’ financial dealings. If you intend to expand, secure funding, enter into strategic business relationships, buy or lease space, etc., you will generally need audited financial statements.

Second, as previously mentioned, the annual audit process can help ensure that your business doesn’t run into seemingly unrelated problems because of a concern or question about your captive insurance company.

Finally, having an annual review can give you peace of mind knowing your captive insurance company is in compliance with all applicable requirements.

To learn more, contact Venture Captive Management today online or call us at 770.246.8535.