Navigating Legal and Regulatory Risks for Captive Insurance Companies

As captive insurance companies become increasingly sophisticated, owners face evolving legal, regulatory, and tax considerations that require careful planning and ongoing oversight. In this episode of The Edge of Risk podcast by IRMI, host Joel Appelbaum speaks with Bailey Roese, partner at Dentons, representing the Self-Insurance Institute of America (SIIA). Ms. Roese discusses the importance of establishing captives for legitimate risk management purposes, selecting appropriate structures and domiciles, and maintaining sound governance practices throughout the captive life cycle.

The conversation examines board responsibilities, documentation, claims administration, and the importance of operating captives as bona fide insurance companies. Ms. Roese also addresses Internal Revenue Service (IRS) scrutiny of micro-captives, the broader implications of captive insurance tax litigation, and the distinction between state insurance licensing and federal tax qualification. She explains how corporate restructuring and the addition of new risks can affect captive operations and tax treatment, emphasizing the importance of knowledgeable service providers, regulatory relationships, and ongoing education.