Captive Insurance A captive is an insurance company that is created and wholly owned by one or more non-insurance companies to insure the risks of its owner (or owners). Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured. They are typically established to meet the risk-management needs of the owners or members. Captives are formed to cover a wide range of risks; practically every risk underwritten by a commercial insurer can be provided by a captive. The type of entity forming a captive varies from a major multinational corporation—the vast majority of Fortune 500 companies have captive subsidiaries—to a nonprofit organization. Once established the captive operates like any commercial insurance company and are subject to state regulatory requirements including reporting, capital and reserve requirements.
Over the last 20-30 years, there has been significant growth in the captive market. Today, there are over 5,000 captives worldwide compared to roughly 1,000 in 1980 according to AM Best Captive Center. Captives can be domiciled and licensed in a wide number of domiciles, both in the U.S. and off shore. The number of captive domiciles is growing and remains competitive. In terms of number of captives, Bermuda is the largest single jurisdiction followed by the Cayman Islands. In Europe, Guernsey, Luxemburg and Ireland are the market leaders. In the U.S. Vermont is the largest domicile and is conserved a leader in captive legislation.
There are various types of captive structures. The vast majority of captives insure only the risk of its parent (single parent or ‘pure’ captive). In addition to single-parent captives, there are group/association captives, rent-a-captive, risk retention groups, agency captives, branch captives, senior or diversified captive, protected cell captive and producer owned reinsurance companies (PORCs). The list is not exhaustive; variations continue to flourish as companies come up with more sophisticated and innovative ways to use captives.
If you put life insurance in this plan the IRS audits and the fine is large.
Lance Wallach
National Society of Accountants Speaker of The Year
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
Posted by Lance Wallach at 9/17/2013 10:13 AM Categories: uncategorized Tags: IRS lance Wallach Expert Witness captive Insurance
Captive Insurance
ReplyDeleteA captive is an insurance company that is created and wholly owned by one or more non-insurance companies to insure the risks of its owner (or owners). Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured. They are typically established to meet the risk-management needs of the owners or members. Captives are formed to cover a wide range of risks; practically every risk underwritten by a commercial insurer can be provided by a captive. The type of entity forming a captive varies from a major multinational corporation—the vast majority of Fortune 500 companies have captive subsidiaries—to a nonprofit organization. Once established the captive operates like any commercial insurance company and are subject to state regulatory requirements including reporting, capital and reserve requirements.
Over the last 20-30 years, there has been significant growth in the captive market. Today, there are over 5,000 captives worldwide compared to roughly 1,000 in 1980 according to AM Best Captive Center. Captives can be domiciled and licensed in a wide number of domiciles, both in the U.S. and off shore. The number of captive domiciles is growing and remains competitive. In terms of number of captives, Bermuda is the largest single jurisdiction followed by the Cayman Islands. In Europe, Guernsey, Luxemburg and Ireland are the market leaders. In the U.S. Vermont is the largest domicile and is conserved a leader in captive legislation.
There are various types of captive structures. The vast majority of captives insure only the risk of its parent (single parent or ‘pure’ captive). In addition to single-parent captives, there are group/association captives, rent-a-captive, risk retention groups, agency captives, branch captives, senior or diversified captive, protected cell captive and producer owned reinsurance companies (PORCs). The list is not exhaustive; variations continue to flourish as companies come up with more sophisticated and innovative ways to use captives.
If you put life insurance in this plan the IRS audits and the fine is large.
Lance Wallach
National Society of Accountants Speaker of The Year
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
Posted by Lance Wallach at 9/17/2013 10:13 AM
Categories: uncategorized
Tags: IRS lance Wallach Expert Witness captive Insurance