Captives

By Marc Fox
December 18, 2015
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Comprehensive information about captive insurance companies (captives) and arrangements, including risk retention groups. While our focus is on the uses of these structures for U.S. companies and business owners, many of these concepts may be useful to others.

This topic is broken into basically three major sections:

Captive Insurance Companies Cases — A selection of Landmark Cases regarding the use of captive insurance arrangements is included.

Risk Retention Groups — Explains these pseudo-insurance company arrangements that are uniquely formed pursuant to federal law, and their use as fronting companies.

Captive Jurisdictions — Overview of the major captive jurisdictions, foreign and domestic, including the insurance company statutes of those jurisdictions.

Additional Information

IRS Guidance on Insurance Company Taxation

Correctly Running A Captive — Overview of what it takes to properly run a captive insurance company and keep it in compliance with the local regulators and the IRS. “Know before you leap!”

Captive Insurance Terms

  • Captive Insurance Company (“Captive”)
    Slang for an insurance company used predominantly to underwrite the business risk of other subsidiaries of the parent company or owner. The term “captive” is not used in any insurance statutes or in the Internal Revenue Code, but is rather a practice term used to describe an insurance company fulfilling the described role.
  • Closely Held Insurance Company (CHIC)
    A privately-held insurance company that is typically owned either by the owner’s children or an irrevocable trust formed for the owner’s children, to provide additional tax and succession benefits in addition to those of the captive arrangement.
  • Insurance Manager
    A person or entity that has obtained a license from the local insurance commissioner to manage insurance companies in that jurisdiction.

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