How a Captive Works

 

 

 

 

 

 

 

 

 

 

One of the best options available to closely held companies with annual revenues of more that $25M is a captive insurance program. There are numerous ways to structure a captive. Among the most frequently chosen options is an 831(b) Captive, so named for the Internal Revenue Code regulation governing its tax parameters.

The captive is owned by a parent company and insures risks that are often not covered in traditional underwriting markets. This option is particularly beneficial to companies with uninsured risks because of cost or being unable to place coverage.

One of the most important aspects of forming a captive is a thorough feasibility study.

A Risk Management professional should be a key part of the study team and must work well with your other trusted advisors including an accountant and legal counsel.

I have been actively educating my valued clients on how the formation of a captive will benefit their businesses. An important part of the initial presentation is this eBook: “Forming a Captive: A Strategic Solution for Closely Held Companies”. You can download your copy by clicking on the book title above.

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