Captive insurance companies (CIC) are insurance companies formed by a business owner or a group of business owners to insure the risks of related or affiliated businesses, rather than relying on an outside commercial insurance company to provide coverage. For example, the owner or a group of businesses can  form  a wholly owned Captive Insurance Company for the purpose of insuring his related companies. The insured businesses pay premiums to the Captive in exchange for insurance. The Captive can be owned by the business owner, his spouse, his relatives, a Trust, or any of the companies he owns.

Captives can be domiciled and licensed in both the US and off-shore. Captive Insurance Companies formed outside the US or offshore can make an IRC section 953(d) election to be taxed as a Domestic US corporation for US Tax purposes, allowing a foreign based Captive Insurance Company to receive the same US Tax benefits and treatment as a Captive formed in any of the 24 US States with Captive Insurance Legislation. The big difference being a foreign based Captive generally has a much lower costs of ownership and a far higher degree of flexibility for its US owners compared to a Captive which is formed in the US.

What type of businesses could benefit from a captive insurance company (“CIC”)?
Businesses that are overpaying for third party insurance or with significant uninsured or underinsured risks, including, but not limited to: contractors, developers, medical groups, family owned businesses, physicians, entertainers, manufacturers, exporters and importers, construction related professions, oil and gas, professional athletes, high tech firms, professional service firms, transportation companies, real estate management companies, etc. 

Businesses with sufficient revenue and profits to afford the premium:
- Over $1,000,000 in gross revenue.
- Over $200,000 in “excess” after-tax profits (i.e., money that doesn’t need to be directly reinvested or paid out as compensation).

captive insurance

Benefits of Captive Insurance

  • Reduced insurance costs
  • Improved cash flow
  • Customized risk protection for your business
  • Increased asset protection
  • Greater control over claims
  • Enhanced estate planning
  • Increased coverage and capacity