Food & Beverage Distributor
Case Study

Background:

Companies in the food and beverage industry have historically operated in a fairly complex business and regulatory environment. To be viable, they manage a sophisticated supply chain while maintaining product integrity. Given the consumer nature, they’re operating under some onerous regulatory requirements. Traditional commercial insurance policies oftentimes do not cover all the nuances of their businesses. More times than not, the carriers earn a healthy profit on their policy since claims are few and far between.

Risk:

Some of the unique risks in the food and beverage industry are product tampering, product recall, and food rejection. In the event the USDA determines that a product is tainted, the distributor not only is without the product they have to deliver but they now have to pay for the product again to satisfy the contract. Expenses related to product recall and product tampering can potentially be significant. However, for companies that have a strong track record and processes, it may be more beneficial to self-insure this risk.

Solution:

A captive insurance company is an entity that is established to insure the risks of its owner and affiliated companies. When properly structured, premiums are tax-deductible to the company and received tax-free by the captive insurance company. The captive insurance company serves as a more efficient method to self-insure. As the captive insurance company receives premiums every year, the increasing capital and surplus serve as an efficient pool of assets for any future losses.

Food and beverage companies can have their captive insurance companies write policies unique to their businesses. Not only are they able to manuscript policies that have fewer exclusions, all the underwriting profit that would have gone to a third-party commercial carrier is now theirs to keep.

A captive insurance company proved to be a very unique and flexible tool. It afforded the owner a better way to manage their risks and protect their wealth.

Practice Leader(s)

Captive Practice Leader, Managing Director

Max Jong

Captive Practice Leader, Managing Director

Max Jong is the Captive Practice Leader and Managing Director at Risk Management Advisors, an alternative risk and captive management firm. Max began his career at Northwestern Mutual in 1994 after graduating from UCLA. Over 12 years, he built a successful financial services practice while heading up an office overseeing 50 professionals in Los Angeles and Irvine, California. The office was perennially one of the top producing organizations in the Northwestern Mutual system.

Max joined his partners at Risk Management Advisors in 2007 as he began to work with more sophisticated mid-market business owners. RMA specializes in the design, formation and management of captive insurance companies. There’s also an emphasis on self-funded group benefits as well as other creative alternative risk management strategies. The firm assists businessowners in better managing their risks without jeopardizing their balance sheet. In 2019, he headed up a merger with Risk Strategies, a Top 10 private national specialty insurance brokerage and consulting firm. Since then, he was appointed as the Captive Practice Leader to oversee the growth and development of the organization.

For 5 years, Max served as an Independent Director for Fiat Lux Risk and Insurance Company, one of the largest and most sophisticated captive insurance companies. Fiat Lux was established by The University of California Regents to better manage the broad risks of the University of California system.

Max has also been a life-long supporter of Big Brothers Big Sisters of Greater Los Angeles. He initially volunteered to be a mentor in 1995 and is currently mentoring his second "Little". Max was asked to join the Board of Directors in 2000 and eventually serving as their Board Chair. After 20+ years as an active board member, he continues to support the organization by serving as a Trustee.

He is married to Alice and they’re raising two young children, Hunter and Hayden. Max and Alice are happily married despite her irreparable mistake of having gone to USC. He loves to travel, loves to golf and a hopeful Lakers fan.