Question 1

What exactly is private reinsurance, and how is it different from regular business insurance?

Accepted Answer

With traditional insurance, you pay premiums to an outside company and rarely see that money again, even if you never file a claim. With private reinsurance, your business expenses premiums to an unrelated, licensed third-party carrier, which then reinsures a portion of that risk and premium back to a reinsurance company you own.

Net of claims, you participate in the underwriting profit. It could turn a sunk cost into a long-term asset.

Question 2

What happens to my premiums after they're remitted?

Accepted Answer

After an initial 30-day risk-transfer window, approximately 85% of remitted premium is ceded into a bank account you choose, held within your privately owned reinsurance company. You are the only signer on that account. The funds are not restricted by trusts, escrow, or funds-withheld arrangements.

From there, reserves are available for claims, investments, loans, dividends, and business-expansion strategies.

Question 3

How much can my business expense in premiums?

Accepted Answer

An independent actuary identifies the risks being insured and recommends premiums; the carrier sets them. Roughly 10% of gross annual revenue is a common benchmark across the portfolio. Premiums are never sized to a target deduction.

Premiums are generally deductible as ordinary business expenses on your P&L. Your CPA confirms treatment, the same as the premiums you already pay commercial carriers.

Question 4

What happens to claims and surplus?

Accepted Answer

You decide if and when a claim is submitted. The third-party carrier reviews and approves or denies it. Approved claims are paid and reimbursed from your reinsurance company's reserves. Filing is a brief claim form, and owners often complete it in minutes.

Retained underwriting profit could accumulate as your asset, and may be available for legacy planning and intergenerational transfer.

Question 5

How can the reinsurance company's assets be invested?

Accepted Answer

Premium assets can be invested at the owner's discretion: cash-management accounts, stocks, bonds, mutual funds, real estate, and private loans, including related-party loans at the Applicable Federal Rate minimum.

A commonly recommended (not mandated) practice is keeping about 20% of premium assets semi-liquid to satisfy potential claims.

Question 6

How do I take money out?

Accepted Answer

Distributions can be structured as loans, investments, or dividends, and net profit can be distributed at year end into qualified retirement structures. That may add planning flexibility on top of the premium deduction. Review the specifics with a licensed CPA familiar with the structure.

How The Latitude Plan Works

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