Captive Basics
What Is a Reciprocal Insurance Company and How Is It Taxed?
A reciprocal insurance company is an arrangement through which mutual promises of the participants are exchanged with respect to their insurance risks. While not a separately incorporated company, it is characterized as an insurance company for federal tax purposes. Read More
Why Do Captives Get Credit Ratings?
While the need for ratings by traditional insurers is obvious, it is not so apparent for captives. This article explains why some captive insurance companies go through the credit rating process. Read More
The Basics of the 831(b) Election for Captives
Section 831(b) of the Internal Revenue Code may be elected by qualifying captives to exempt the captive insurer's underwriting profits from federal income tax. This article discusses the prerequisites that must be met as well as the transactions of interest reporting requirements. Read More
Taxation of Single-Parent Captives: A Basic Guide
One common captive structure is an insurance company owned by a single US corporation (a "single-parent captive"), which insures the risks of its parent and/or brother/sister companies. In some cases, single-parent captives cover risks of third parties as well as related party risk. The US federal income tax treatment of a single-parent captive and its owner depends in part on whose risk the captive insures and on whether the captive is a US company or a non-US company. This article summarizes the basic tax rules applicable to single-parent captives and their owners in various situations. Read More
What Are Association and Group Captives?
Group captives are formed when a group of individuals or entities comes together to jointly own a captive insurance company. Sometimes they are sponsored by industry associations for the benefit of their members, hence the alternative name "association captive." Read More