Captive Insurance Blog

A Captive Insurance Company is an insurance company that primarily insures the risks of businesses which are related to it through common ownership. For example, the owner or a group of businesses can form a wholly owned Captive Insurance Company for the purpose of insuring his related companies. The insured businesses pay premiums to the Captive in exchange for insurance. The Captive can be owned by the business owner , his spouse, his relatives, a Trust, or any of the companies he owns.

Captives that are owned by US citizens account for approximately 3,500 of the nearly 5,000 Captives that are currently in operation worldwide. Captives can be domiciled and licensed in a wide number of domiciles both in the US and off-shore. There are now approximately 24 US States and well over 35 countries with Captive Insurance legislation that serve as excellent Captive Insurance domiciles. Captive Insurance Companies that are formed outside the US or offshore can make an IRC section 953(d) election to be taxed as a Domestic US corporation to US Tax purposes. This allows a foreign based Captive Insurance Company to receive the same US Tax benefits and treatment as a Captive formed in any of the 24 US States with Captive Insurance Legislation. The big difference is that a foreign based Captive generally has a much lower costs of ownership and a far higher degree of flexibility for its US owners compared to a Captive which is formed in the US. For this reason most small Captive Insurance Companies with annual premiums below $1.2 million are formed offshore. The table below entitles ” A List of US and Foreign (Offshore) Captive Insurance Domiciles” list the 24 US States with Captive Insurance Legislation as well as the 35 foreign countries which have Captive Insurance Legislation and serve as excellent Captive Insurance domiciles. The following site has excellent respources concerning Captive Insurance: http://www.wmsolutionsnow.com