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Own Your Own Protection Plan

Ensure Your Business And Tenants Are Protected

Currently, your tenants pay third-party insurance companies for their coverage. Premiums are collected and pooled into an account and as your tenants file claims for let’s say, a broken door or water damage to the contents inside, the insurance company pays them out. Whatever’s left over, they keep. Imagine if there was a simple way for you to redirect the money your customers were already paying into a tax advantaged reserve, and managing that risk more effectively. Seems too good to be true, but with a little guidance, it can be a reality.

Executive Summary

In today’s ever changing environment, it’s important for any successful business to develop a competitive advantage in the marketplace and mitigate the risks that come along with day-to-day business operations; the self-storage industry is no different. Customers are looking for added benefits when choosing a storage facility, and with the amount of competition in the market place, customer retention is becoming increasingly difficult. In order to compete, companies must develop competitive advantages to differentiate itself above its competitors. One such advantage is the implementation of an Storage Damage Waiver (SDW) and contents coverage program.

Minimize risk, and maximize the benefits by offering your own custom Protection Plan.

What Is Storage Assurance?

Storage Assurance is a custom protection plan for tenants. For years, insurance companies have been collecting insurance premiums from storage unit tenants. No one questions this paradigm because, well, that’s the way it’s always been. With Storage Assurance, we’re attempting to retrain that perspective. We want to empower storage unit owners with the knowledge and guidance to help them manage tenant risks and relationships more effectively.

Case Study


Evergreen Management Company (EMC), a midsize company managing 83 locations in 15 states. EMC specializes in Self Storage and Multi-family housing.  EMC is owned by REIT. 


  • EMC requires that all facilities offer coverage via a 3rd party insurance provider. However, participation in this program is not substantial and EMC only receives a small percentage of premiums earned.
  • Due to an increase in competition, EMC was looking for a way to differentiate themselves from their competition.
  • Seeing that no third-party insurance provider (Tenant Insurance) presently provides any type of coverage for vehicles not parked in an enclosed unit, EMC sees this as a missed opportunity.
  • When an incident occurs, EMC lacks effective ways to help clients offset damage caused by a tenant. Ultimately, the risk and repair costs are assumed by EMC and paid out of gross revenue or its own traditional insurance policy, potentially leading to increased premiums and decreased profits for EMC and facility owner.
  • The EMC management team is looking for more efficient tools to mitigate risks to their facility owner and increase their Net Operating Costs.

Find out how Storage Assurance helped Evergreen Management Company create an additional source of income while providing superior protection for their tenants.


    Stop offering 3rd party insurance products; by owning your own Protection Plan you are taking steps to ensure your business stands out in the marketplace.


    Reinsurance is insurance for insurance companies. It is the transfer of part of the hazards, or risks, that a direct writer assumes, by way of an insurance contract or legal provision on behalf of an insured, to an additional insurance company, the reinsurer, that has no direct contractual relationship with the insured.

    A direct writer is an insurance company that initially underwrites the risk, and then, may transfer the insurance it has written to another insurance company or reinsurance company.

    An operating company would be known as the insured. The operating company transfers its risk to the direct writer for a premium. This process is the same as the operating company transferring their risk using a general liability or worker’s compensation policy.

    SRA believes each producing company has risks that are unique. This risk needs to be assessed by SRA and the owners of the operating company. Once the risk is determined, the premium would be assessed by the underwriting direct writer.

    Multiple risks may be transferred to the direct writer including: professional liability, supply chain interruption, data breach, food borne illness, brand protection, contingent business interruption & dispute resolution. The risk must be fortuitous and not considered to be a business risk.

    In order for this to be a legitimate tax deduction there must be actual risk shifting and risk distribution. SRA utilizes risk shifting through the direct writer. The risk distribution is handled in the reinsurance agreement made between the direct writer and the reinsurance company. The reinsurance company will have 50% affiliated risk under a facultative clause and 50% unaffiliated risk is shared on a pro-rata basis across all reinsurance companies which have reinsured the same risk under a treaty clause.

    This deduction would be a line item 162 deduction. This deduction would be treated no differently than the premium paid on a general liability or worker’s compensation policy.

    SRA relies on several IRS ruling and private letter rulings. To find more detail, visit our Tax Resources page at

    The direct writer will cede at least 90% of the premium. The administrator of the direct writer does not charge any other fees for: ceding premium, handling claims, handling loan documents, or any other quarterly processing requirements.

    The administrator of the direct writer charges $5,000 to form a reinsurance company. This charge will go toward the chartering fees and legal documents for the formation of the reinsurance company. Stock certificates will be provided for the individuals or entities that will own the reinsurance company. The filing for the reinsurance company will be handled by the administrator of the direct writer as well. The ongoing fees to maintain a reinsurance company are typically $5,000 annually; this fee is paid to the administrator of the direct writer. Out of that fee the reinsurance company’s annual charter renewal fees are paid, and an 1120PC tax return is completed.

    To take advantage of owning a reinsurance company the minimum premium that would need to be ceded into the reinsurance company is $80,000 annually. The maximum you can cede into a reinsurance company, for tax purposes, is limited to $2.2 million annually. The premium ceded into the reinsurance company has to be appropriate for the amount of risk being insured.

    The reinsurance company is structured as a C-Corp and is domiciled in the Modoc Tribe’s sovereign reservation land in the state of Oklahoma. The administrator applies for the C-Corp’s Employer Identification Number and is subject to U.S. federal taxation. It files a U.S. Federal 1120PC tax return.

    The IRS Code Section 831-B effectively allows a small casualty insurance company to receive up to $2.2 million per year in premiums without paying income taxes on the ceded premium. Taxes are only paid when the profits are distributed to shareholders. Under this structure the significant advantage is that a reinsurance company is able to accumulate a surplus from underwriting profits whereas non-insurance entities must pay tax in the year it receives the income.

    Underwriting profit is exclusive to the insurance industry. Underwriting profit consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on the held premiums. Investment income from the premium reserves will be taxed at C-Corp tax rates.

    Access to reserves can occur in three ways:

    1. Declare a dividend, and distribute the reserve at a reduced tax rate.
    2. Upon liquidation, distribution may be taxed as a long term capital gain, reduced tax rate.
    3. Make loans to shareholders. No tax event occurs, but the note must be a performing loan and be documented under a loan agreement

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