The Smell of Money
“The smell of money” is often a term used when someone smells some type of animal manure. Usually, the “money making manure” is produced by animals who are raised for human consumption, including hogs, cattle, chickens, and turkeys…just to name a few. If you’re reading this and wondering if this entire stinkin’ blog — pun intended — is going to be about manure, you actually CAN take a deep breath, because no, it is not. However, the message is that to be successful in any type of business, business owners must take what others perceive as “waste” and turn it into a profit center. For example: Farmers use the manure produced by their animals to fertilize their crop producing fields to increase yields.
Since 1999, Holmes Murphy and Innovative Captive Strategies (ICS) have been taking insurance premiums and helping their clients turn those premiums into a profit center by creating captive insurance companies. So is there a similarity between insurance premiums paid into the traditional market and manure? Absolutely! What some perceive as a waste can be turned into profit.
Captive insurance companies are not a new concept. Captives have been in existence since around 1982. ICS was founded in 1999 and is dedicated solely to establishing and managing captive insurance companies to help its clients become the most efficient version of themselves. Since ICS’ foundation, Holmes Murphy has been partnering with the company as its exclusive captive broker to provide captive solutions to Holmes Murphy’s current clients and prospects.
Since ICS has been specializing in captives for more than 17 years, why in 2016 are we discussing captives in this blog as a “new concept”? Because, until now, there hasn’t been a homogenous captive dedicated exclusively to agricultural-related risks. Through Holmes Murphy’s work in the agricultural (Ag) space with our current clients and prospects, we determined that the Ag market, especially livestock producers, have been denied the opportunity until now to engage in a captive that represents their peers and best practices. The Ag industry has been ever-changing and evolving. What was once your traditional family farm that sustained only your immediate family has evolved into a company that provides food for hundreds of thousands of families worldwide. As a result of family farms growing from 10 sows to 50,000 sows to meet the growing demands of the world’s food needs, family farms have organized, incorporated, and become sophisticated producing entities. As farms grow into sophisticated entities, they, too, should enjoy the opportunities that captives have to offer; which brings us to the present.
Holmes Murphy has partnered with ICS to create an Ag-specific captive! Holmes Murphy is currently working with hog producers to qualify those producers that would benefit from the captive. Soon, Holmes Murphy will be working with other livestock producers to determine if those producers will benefit from the captive as well. Eventually, if it would improve the best practices and financial returns of the current members, other Ag businesses may be asked to join, but the most important factor will be whether the current members would benefit from an expansion.
The “who, what, when, and where” have been covered, but what about the “how”? To qualify as a prospect for this Ag captive, prospects must have approximately $300,000 of premium in the following lines of coverage: general liability, workers’ compensation, automobile liability, and physical damage. Also, we’ll assess the prospect’s losses in those three lines to determine if a captive would be profitable for that prospect. Partnering with ICS, Holmes Murphy provides an option for Ag prospects to take the premiums paid in their liability lines and receive a return on their investment instead of just giving those unearned dollars to their traditional insurance companies. And, even if a prospect isn’t ready at this point to enter the captive, Holmes Murphy will partner with that prospect to improve their risk profile so that they can enter the captive in the future and “make fertilizer out of manure.”
We’re excited about this new venture and would love to talk with you about it if you’re interested! What questions or concerns do you have? How can I help you understand if this would be an option for you? Comment below and let me know!
Published on: 05.31.16