Commercial insurance prices are skyrocketing because of
investment losses by the major insurance companies.
Protect your business against rising insurance costs
with a captive insurance company.
Legally reserve for future claims with pre-tax
dollars. |
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The All-Time Bestselling
Captive Insurance Primer |
 |
Available
now from:
Amazon
and
Barnes & Noble |
© 2009 by Riser Adkisson LLP. All rights reserved. No
portion of these materials may be reproduced in whole or
in any part without the express written permission
of
Riser Adkisson LLP. Legal issues should
be faxed
to
877-698-0678.
|
|
Welcome!
This website provides an introduction to the
concept of the captive insurance company and its most popular
variants. It is written on an introductory and educational level
to help those business owners and their advisors who are
considering a captive arrangement.
Advanced support for captive owners, service
providers, and others in the captive sector is found on our
Captive
Forum.
| A captive insurance company is
simply an insurance company owned by the parent that
underwrites the insurance needs of the parent's
subsidiaries. |
 |
This website also supports the book
Adkisson's Captive Insurance Companies: An
Introduction to Captives, Closely-Held Insurance Companies and
Risk Retention Groups written
by
Jay Adkisson.
The author has been active in the alternative risk management
sector since 1995, has been forming captive insurance companies
since 1998, and for several years was the owner of a licensed
captive insurance management firm in the British Virgin Islands.
Mr. Adkisson
is an attorney licensed in California, Oklahoma and Texas and
practicing in the law firm of
Riser Adkisson
LLP which has offices in Newport Beach/Orange County,
California, and Athens, Georgia. He has twice appeared as
an expert witness to the U.S. Senate Finance Committee and has
lectured to the U.S. Internal Revenue Service, the U.S.
Department of Justice, the University of Miami's Heckerling
Institute on Estate Planning, the American Bar Association,
numerous state and county bar associations, and similar forums
nationwide.
Captive insurance companies are here to
stay. Until 2002, the IRS repeatedly but unsuccessfully
challenged captive insurance companies as subterfuges for
non-deductible self-insurance within the business.
After the IRS lost its $600+ million challenge against a
captive owned by
United Parcel Service
in 2001, the Service resigned itself to the legitimacy of
captive insurance companies and soon thereafter abandoned its
economic family challenges to captives. The IRS has since issued
a great deal of guidance to assist captive owners in their
proper structuring, management and reporting.
Nearly all major corporations have captives.
Some corporations have multiple captives that serve different
risks. For instance, a corporation may have one captive that
primarily covers the corporation's general liability,
environmental liability, and product liability risks, and then
another captive that insures the employee benefit liabilities of
the corporation, such as workers compensation and healthcare.
The captive sector is significant and
growing. Premiums paid in 2006 to captives domiciled Vermont
alone were estimated to exceed $11.55 billion.
| EXAMPLES1 OF
CORPORATE CAPTIVES |
| Parent |
Captive |
| Exxon-Mobil |
Ancon Insurance
Company |
| Archer Daniels
Midland |
Agrinational
Insurance Company |
| Verizon |
Exchange
Indemnity Company |
| AT&T |
Gateway Rivers
Insurance Company |
| University of
Michigan |
Veritas
Insurance Corporation |
| Phillips
Petroleum |
Sooner Insurance
Company |
| Starwood Hotels |
Westel Insurance
Company |
| Johnson &
Johnson |
Middlesex
Assurance Company |
| CBS Corporation |
Central Fidelity
Insurance Company |
| Boeing |
Astro Limited |
| 1
It is increasingly difficult to identify large companies
that do not have at least one captive. |
Increasingly,
non-profit organizations are also forming captive insurance
companies to handle their insurance risks in-house. One example
is Veritas Insurance Corporation, a captive insurance company of
the University of Michigan. Another is the
National Catholic Risk Retention Group, Inc., a captive
insurance company wholly owned by its member dioceses.
More than half of the states have now passed
captive insurance enabling statutes, and more than a half-dozen
of those states now aggressively cater to the domestic captive
market. Captives are now being formed for medium-sized
businesses that are able to pay as little as $500,000 per year
in premiums to their captive.
Many advisors are only now becoming
aware of the concept of the captive insurance company and
introducing it to their clients. In addition to serving an
insurance function, captives can also legitimately serve an
intergenerational wealth transfer function to the extent that
underwriting is successful by being tightly integrated with an
advance estate plan.
We assist prospective captive owners and
their advisors in evaluating, designing, and implementing
captive solutions. We also review existing captive structures
and suggest ways that they can be used more efficiently. In
addition to Mr. Adkisson's own firms, we also have relationships
with experienced and reputable insurance managers, actuaries,
underwriters, and accountants who specialize in captive
insurance arrangements.
You may contact
Jay Adkisson
for a telephone conference or for a speaking engagement by
calling his scheduling assistant at 949.200.7284 or by e-mailing
him directly to jay [at] risad.com (We serve clients
nationwide).
Further explore this website from the
Sitemap
| INDUSTRY NEWS |
|
TAM 200827006 on Manufacturer's Original
Product Warranty Risks
IRS Technical Advice Memorandum 200827006
emphasizes that reimbursement policies are not deductible where
the warranty is included with the product, as opposed to an
extended warranty that would normally be deductible.
READ MORE
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Vermont Reports Premiums of $15
Billion
Vermont reports that premiums paid to its
captives in 2007 showed a 32.7% increase over premiums paid in
2006, although only four new captives were formed there in 2007
as other states aggressively compete for the new formation
business.
READ MORE
|
|
TAM
200816029 on Partnership Entities
Counted For Risk Distribution Purposes
IRS Technical Advice Memorandum 200816029
confirms that a partnership entity that is not treated as a
disregarded entity will count towards the number of insureds for
risk-distribution purposes, even if owned in substantial part by
the same parent as the captive.
READ MORE
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Michigan Adopts Captive Insurance Legislation
Read article
here. Whether Michigan's notoriously anti-business
reputation will allow the state to actually attract out-of-state
captive business is another thing altogether. Forming in-state
captives rarely makes sense because of state premium or
independently-procured taxes, which is why businesses usually go
out-of-state for their captive formations. Still, Michigan is
one of the first large states to adopt legislation that seeks to
attract captive formations.
READ MORE
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|
IRS Abandons Challenge to Deductibility of Reserves
Within Consolidated-Return Captives
Bowing to intense lobbying major corporations that have captives
and Congressional pressure from the domestic captive domiciles,
the IRS has decided that it will abandon its challenge to the
deductibility of reserves within captives that are part of a
control group with a common parent (which would encompass most
large captives). This is a very clear and significant victory
for the tax viability of captive insurance companies.
READ MORE
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IRS Rules Each Cell of a Protected Cell Company Must Be
Treated as a Stand-Alone Captive for Testing of Risk Shifting
and Distribution
Rev.Rul.2008-8 provides guidance on the standards for
determining whether an arrangement between a participant and
cell of a Protected Cell Company (defined below) constitutes
insurance for federal income tax purposes, and whether amounts
paid to the cell are deductible as "insurance premiums" under §
162 of the Internal Revenue Code.
READ MORE
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Since its release in late 2006,
Jay Adkisson's book on captive insurance companies has
become the all-time captive insurance bestseller,
providing a basic introduction to captives and related
structures and how they are properly utilized within the
context of the client's overall business and estate
planning.
Available now from:
Amazon and
Barnes & Noble
|
We assist prospective captive owners and their advisors in
evaluating, designing, and implementing captive solutions. We
also review existing captive structures and suggest ways that
they can be used more efficiently. In addition to Mr. Adkisson's firms, we also have relationships with experienced and
reputable insurance managers, actuaries, underwriters, and
accountants who specialize in captive insurance arrangements.
You may contact
Jay
Adkisson for a telephone conference or for a speaking
engagement by calling his scheduling assistant at 949.200.7284
or by e-mailing him directly to jay [at] risad.com (We
serve clients nationwide).
|
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GENERAL DISCUSSION AND
NEWS
Discussion of news and general issues relating to
captive insurance companies and alternative risk
transfer and management issues. Most new posts will
go here unless clearly bound for another category. |
Calendar of Upcoming
Events
A listing of upcoming events involving captive
insurance companies and alternative risk management,
including association meetings, educational forums,
etc. Please send us your meeting information to add
to our list! |
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Formation and
Licensing
Discussion of issues relating to the insurance
license application, the issuance of the license,
capitalization, etc. |
Cell Captives and
Rent-A-Captives
Discussion of segregated cell captives and similar
arrangements that are primarily designed for
businesses that are too small to economically
justify a captive. |
Group Captives and
Association Captives
Discussion of large group captives and captives
serving associations. |
Risk Retention Groups
Discussion of insurance companies formed under the
Federal Liability Risk Retention Act of 1986. |
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Risks and Policies
Discussion of the insurance risks for businesses and
the policies that can be developed to cover those
risks |
Workers Compensation
Discussion of workers compensation insurance,
including fronting arrangements and reinsurance. |
Healthcare and
Benefits
Discussion of moving employee healthcare insurance
and other employee benefits into a captive or
similar arrangement. |
Medical Malpractice
Discussion of the use of captive and other
alternative risk transfer strategies for medical
malpractice liability. Includes discussion of tax
scams sold to physicians involving medical
malpractice premiums paid to offshore insurance
companies. |
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TAX ISSUES |
Tax Issues Generally
Discussion of tax issues relating to captives and
other alternative risk transfer and management
issues other than those listed in one of the forums
below. |
Federal Risk Shifting
and Insurance Contracts
Discussion of the federal tax law requirements for
"insurance" as they relate to the shifting of risks
and what constitutes a valid insurance contract as
opposed to an economic hedge. |
Federal Risk
Distribution
Discussion of the federal tax law requirements of
risk distribution, including what does and does not
qualify for the 12+ affiliate safe harbor, and
attribution issues. |
Federal Excise Taxes
on Insurance
Discussion of the federal excise taxes on insurance
premiums paid, including premiums paid to offshore
captive insurance companies |
831(b) Election
Discussion of the 831(b) election for insurance
companies whose annual net premium income does not
exceed $1.2 million per year. |
501(c)(15) Exempt
Insurance Companies
Discussion of insurance companies qualifying for
exempt treatment under IRC section 501(c)(15) for
gross receipts not exceeding $600,000 per year of
which at least half those receipts are premium
income. |
State Income Tax and
Independently Procured Tax Issues
Discussion of state income tax issues for
alternative risk management transactions and
captives, including whether out-of-state captives
are subject to state income tax and whether a state
may assess a premium tax or independently procured
tax to premiums paid to captives. |
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UTILIZATION OF ASSETS |
Captive Investments
Discussion of appropriate vs. inappropriate
investments for captive insurance companies,
permitted asset rules, and regulatory preferences. |
Loanbacks
Discussion of the practice of having the captive
loan money back to an insured or the parent company
and the effect of loanbacks on the tax treatment of
the captive arrangement. |
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DOMICILES - STATES |
|
Arizona |
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Hawaii |
|
Kentucky |
|
Montana |
|
Nevada |
|
South Carolina |
|
Utah |
|
Vermont |
|
Other States Not
Listed |
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|
DOMICILES - OFFSHORE |
|
Bermuda |
|
British Virgin
Islands |
|
Cayman Islands |
|
Other Offshore
Domiciles Not Listed |
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|
CAPTIVE SERVICE
PROVIDERS |
Accountants and
Auditors
Listing of accountants and auditors who provide
bookkeeping services and/or have been admitted by an
insurance commissioner to perform audits of captive
insurance companies. |
Attorneys
Listing of attorneys and law firms that provide
services to captive insurance companies and similar
alternative risk transfer arrangements. |
Actuaries
Listing of actuaries who provide actuarial services
to captive insurance companies. |
Managers
Listing of captive insurance managers who have been
admitted in one or more jurisdictions to
administrate captives. |
Other Service
Providers and Consultants
Listing of service providers to captives not
otherwise listed above and consultants to captive
insurance companies and alternative risk transfer
structures. |
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