The Challenge
A mid-market plumbing company faced mounting roadblocks that threatened its growth and long-term strategy. Rising insurance premiums were draining cash flow, and because policies weren’t assignable, the company risked losing critical Department of Defense contracts with Sandia and Los Alamos National Labs. At the same time, they lacked the capital needed to restructure operations, upgrade technology, and rebrand in preparation for a planned acquisition within six years.
The Approach
SeCAP provided a sponsored captive insurance solution that reframed the company’s insurance spend into a financial engine.
- Captive Formation: Established a captive under SeCAP’s domicile, with SeCAP covering upfront costs for corporate, financial, and regulatory setup.
- Fiduciary & Reinsurance Support: Delivered compliance oversight, claims governance, and risk distribution to ensure stability and regulatory approval.
- Governance Structure: Created a board—controlled by the plumbing company—to manage disbursements, coverages, claims, and tax elections.
- Financial Control: Directed $1,000,000 in annual premiums into the captive, avoiding escalating third-party premiums and building surplus.
- Strategic Reinvestment: Structured surplus funds to support cybersecurity, CRM and FSM systems, and a brand rebuild.
The Response
With the captive in place, the company gained financial independence and flexibility:
- Insurance assignability was achieved, securing DOD contracts and preserving millions in revenue.
- Premiums redirected into the captive produced a 22% surplus—over $221,000 annually—to fuel growth initiatives.
- Investments in CRM and FSM software streamlined operations, and the FSM platform was later licensed to other trades, creating a new revenue stream.
- A $150,000 reserve fund was established, ensuring resilience against unexpected disruptions and providing capital for reinvestment.
Results & Takeaways
- Strategic Insurance as Growth Capital: Captive surplus funded technology, branding, and operational improvements, preparing the company for acquisition.
- Accessibility for Mid-Market Firms: Sponsored captives reduced upfront costs, making advanced risk financing viable for smaller businesses.
- Compliance as a Competitive Edge: Insurance assignability allowed the company to retain high-value federal contracts.
- Revenue Diversification: Surplus-funded technology created a brand-new revenue stream beyond plumbing services.
- Acquisition Readiness: By restructuring its finances and brand, the company positioned itself as a stronger, more valuable acquisition target.
In summary, SeCAP transformed rising insurance costs into a strategic asset, helping this plumbing company secure key contracts, build resilience, and unlock growth opportunities on the path to acquisition.