A Captive Insurance Company is an insurance company owned by you. An individual company or trust sets up and forms an insurance company. Once licensed, the Captive functions just as most insurance companies do. IT can sell insurance coverage (but generally such sales are only to its owners), receive premium dollars and invest them to pay claims and, when needed, approach the reinsurance market to purchase reinsurance to cover losses.
The premiums of the Captive Insurance Company are to be paid by the operating business purchasing the insurance coverage(s).
No, the business does not have to be established where the Captive Insurance Company is domiciled.
A Feasibility Study generally requires an actuary’s involvement as it is part of the business plan of the captive. This study will show conservative and adverse scenarios of the captive based on what the captive will be offering in terms of coverages and limits it will be insuring.
Management Services International is a full-service Captive Management firm that provides all the services needed to maintain a Captive Insurance Company in compliance. These services include such items as filing of tax returns and NAIC statements if applicable.
A Captive Insurance Company generally writes Property and Casualty insurance.
The types of investments permitted by a Captive Insurance Company are determined by the owners and domicile that approves the investment policy.
The most common Captive Benefits are:
– Profit Center
– Cover risk not covered in the commercial insurance market
– Reduce premiums paid to commercial policies
– Better management of risk
– Increase risk awareness
– Tax Benefits
Yes, a business that has a gross revenue of 1MM or more per year can have a Captive Insurance solution where the benefits exceed the cost.
No, just by owning a captive it does not mean you are an IRS target. Some types of captives require additional forms that need to be filed with the IRS if they are applicable, but even if those are filed, it does not mean you are an IRS target.
This is incorrect – most captives are for smaller to mid-sized companies whose gross revenues range from 1 million to 250 million per year depending on the captive structure.
Unfortunately, that is the problem with Google and other search engines as they allow a person to get information quickly, however if might not necessarily be accurate. That is the case with Captives as Captives done for the right purpose and managed by an expert Captive Manager like MSI can have great benefits.
There are many different ways to come out of a captive when the captive is no longer needed. These discussions should include the clients CPA as there are different exits that can provide different tax liabilities. Generally, when you shut down a captive and distribute your equity in the captive, you will pay long-term capital gains taxes if you held your shares of stock in the captive for over a year.
This depends on how the captive is structured. If you personally own the shares of stock in the captive your shares will go to whomever your will or trust specifies to receive those assets.
It is easy to get started. Email us at firstname.lastname@example.org or call us at 833.INS.RISK and one of our team members will be happy to assist you with our solutions.