Captive Structure type filter selection
Learn more about Captive structures and how to choose the right one
Single-Parent
(0)
Cancel
Apply
Alabama
2006
Unavailable
Unavailable
Unavailable
15-30 days
Unavailable
Average Cost
Commissioner discretion based on type / nature / volume of business; Single-Parent, $250,000; Association, $500,000; Industrial, $500,000; Cell, $250,000; Reciprocal, $1,000,000
Commissioner discretion based on type / nature / volume of business
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Reinsurance; Reciprocal
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-86.79113
32.806671
us-onshore
Text Link
Anguilla
Unavailable
Unavailable
$705,175,654
Unavailable
3-4 weeks
Unavailable
Unavailable
Unavailable
1.9:1
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies;
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-63.068615
18.220554
us-offshore
Text Link
Arizona
2002
Unavailable
$11,960,000,000
Unavailable
30-45 days
No routine exams except for Captive RRGs (generally every five years)
Varies
Single-Parent, $250,0000; Group, $500,000; Association, $500,000; Agency, $500,000; Protected Cell, $500,000
Varies based on risk profile
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups
176
151
5
10
Unavailable
5
-111.093735
34.048927
us-onshore
Text Link
Arkansas
2001
Unavailable
$397,454,000
$1,037,000,000
30 - 60 days
Unavailable
Unavailable
Association, $400,000; Industrial Insured, $200,000; Single-Parent, $100,000; Special Purpose, $300,000; Sponsored, $250,000; Producer Reinsurance, $300,000
Single-Parent and Industrial Insured not subject to any restrictions on allowable investments; Single-Parent, $150,000; Association (Stock), $350,000; Mutual insurer, $750,000; Industrial Insured, $300,000 (Stock), $500,000 (Mutual); Special Purpose, $300,000; Sponsored, $250,000; Producer Reinsurance, $300,000
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
16
12
Unavailable
Unavailable
Unavailable
2
-92.289597
34.746483
us-onshore
Text Link
Australia
Unavailable
Unavailable
Unavailable
Unavailable
3 months
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
133.775136
-25.274398
international
Text Link
Bahamas
Unavailable
Unavailable
Unavailable
Unavailable
30 - 60 days
Unavailable
Unavailable
General Insurance Business, B$100,000; Long-Term Insurance Business: B$200,000
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-77.39628
25.03428
us-offshore
Text Link
Bailiwick of Guernsey
Unavailable
5
Unavailable
Unavailable
4 - 6 Weeks
Unavailable
Unavailable
General Business, €100,000; Long Term Business, €250,000
Risk-based solvency regime tailored to Captives
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
Unavailable
138
Unavailable
Unavailable
123
61
-2.58949
49.448196
international
Text Link
Barbados
Unavailable
Unavailable
Unavailable
Unavailable
3 weeks
Unavailable
Unavailable
Class 1 (related risks), $125,000
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-59.543198
13.193887
us-offshore
Text Link
Bermuda
1978
16
$28,271,000,000
$144,744,000,000
2-4 weeks
Unavailable
Unavailable
Single-Parent (Class 1), $120,000; Group/SPC (Class 2, with <20% Third-Party business), $250,000; SPC/Group/Association/Agency (Class 3, with 20% to 50% Third-Party business), $1,000,000
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-64.75737
32.321384
us-offshore
Text Link
British Columbia
Unavailable
Unavailable
Unavailable
90 days or less
Unavailable
Unavailable
Single-Parent/Association/Sophisticated, CAD300,000
Unavailable
Single-Parent; Association
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-127.647621
53.726669
international
Text Link
British Virgin Islands
Unavailable
Unavailable
Unavailable
Unavailable
3-6 weeks
Unavailable
Unavailable
Property & Casualty Insurers, $100,000; Life & Health Insurers, $200,000
Property and Casualty Insurers (<$500,000 in new written premiums), $100,000; Property and Casualty Insurers ($500,000-$5,000,000 in new written premiums), 20% of NWP; Property and Casualty (>$5,000,000), $1,000,000 + 10% of the difference between NWP and $5,000,000); Life and Health Insurers, $250,000
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-64.639968
18.420695
us-offshore
Text Link
Cayman Islands
Unavailable
41
$14,100,000,000
$48,600,000,000
6 weeks or less
Unavailable
Unavailable
Class B(i) (At least 95% related business premium), $100,000; Class B(ii) (Over 50% related business premium), $150,000; Class B(iii) (50% or less related business premium), $200,000
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
Unavailable
286
127
Unavailable
Unavailable
154
-81.2546
19.3133
us-offshore
Text Link
Colorado
Unavailable
Unavailable
Unavailable
Unavailable
90 days
Unavailable
Unavailable
Single-Parent, $500,000 (may require additional)
Captive Return Premium Exemption (Section 10-6-128(1) C.R.S.) and Captive Receipt of Assets Exemption (Section 10-6-128(2)(e) C.R.S.)
Single-Parent; Group; Risk Retention Groups
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-105.782067
39.550051
us-onshore
Text Link
Connecticut
2012
10
$801,141,643
$3,248,835,378
1-4 weeks
Unavailable
Unavailable
Commissioner authority to reduced capital amounts based on Captive risk profile; Single-Parent/Special Purpose Financial, $250,000; Sponsored/Sponsored (Licensed as Special Purpose Financial Vehicle), $225,000; Association/Industrial Insured, $500,000; Risk Retention Group, $1,000,000;
Commissioner authority based on Captive risk profile
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
53
31
Unavailable
2
24
17
-73.087749
41.603221
us-onshore
Text Link
Curaçao
Unavailable
Unavailable
Unavailable
Unavailable
60 days or less
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent; Group; Risk Retention Groups
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-68.990021
12.16957
international
Text Link
Delaware
1984, rewritten in 2005
Unavailable
$4,307,000,000
$47,798,000,000
60 days or less
Unavailable
Unavailable
Must be maintained in as cash, irrevocable letter of credit, or any assets as approved by the Commissioner who has discretion to prescribe additional capitalization; Single-Parent, $250,000; Agency, $250,000; Association, $250,000; Branch, $250,000; Special Purpose, $250,000; Industrial Insured, $500,000; Sponsored, $500,000; RRG, $1,000,000;
Maintained in as cash, irrevocable letter of credit, or any assets as approved by the Commissioner who has discretion to prescribe additional surplus
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
670
262
50
1
353
Unavailable
-75.52767
38.910832
us-onshore
Text Link
Denmark
Unavailable
Unavailable
Unavailable
Unavailable
180 days
Unavailable
Unavailable
Long-Term (Direct), €3,200,000; Other (Direct): €2,200,000; Reinsurance Captive: €1,000,000; Reinsurance company: €3,000,000
Unavailable
Single-Parent
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
9.501785
56.26392
international
Text Link
District of Columbia
2000, rewritten in 2004
Unavailable
Unavailable
Unavailable
20 days or less
Unavailable
Unavailable
$100,000 for all companies
Single-Parent, $150,000; Association (Stock), $300,000; Agency/Rental/(Mutual) Captive, $500,000; Protected Cell/RRGs, 3:1; Higher for other Captives
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
194
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-77.03637
38.89511
us-onshore
Text Link
Dubai
Unavailable
1
$71,000,000
$550,000,000
Unavailable
Unavailable
Unavailable
Class 1 (Single-Parent), $150,000; Class 2 (20% unrelated), $250,000; Class 3 (Group), $1,000,000; PCC, $50,000 per Cell
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose
Unavailable
5
Unavailable
Unavailable
Unavailable
Unavailable
55.296249
25.276987
international
Text Link
Egypt
Unavailable
Unavailable
Unavailable
Unavailable
4 weeks
Unavailable
Unavailable
Unavailable
Unavailable
Risk Retention Groups
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
30.802498
26.820553
international
Text Link
Federated States of Micronesia
Unavailable
Unavailable
Unavailable
Unavailable
30 days
Unavailable
Unavailable
Single-Parent (with or without third party risk), $100,000; Multiple Corporate (modified PCC), $1,000,000 Core and $100,000 Cell
1.3 to 1
Single-Parent; Group; Protected Cell/Segregated Portfolio companies
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
150.550812
7.425554
international
Text Link
Florida
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent, $250,000; Industrial, $500,000
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-81.760254
27.994402
us-onshore
Text Link
France
Unavailable
6
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
15
Unavailable
Unavailable
Unavailable
Unavailable
1.888334
46.603354
international
Text Link
Georgia
1989, updated in 2019
Unavailable
$7,100,000,000
Unavailable
30 days or less
Unavailable
Unavailable
Single-Parent, $250,000; Association, $500,000; Agency, $250,000; Industrial Insured, $500,000; and Risk Retention Group, $500,000
Unavailable
Single-Parent; Association; Protected Cell/Segregated Portfolio companies; Risk Retention Groups
56
46
9
Unavailable
Unavailable
1
-82.900075
32.165622
us-onshore
Text Link
Germany
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Non-Life insurers, €2,500,000 (except third-party liability, credit and deposit risks); Non-Life insurers, €3,700,000 (if third-party liability, credit and deposit risks); Life insurers, €3,700,000; Captive Reinsurers, €1,200,000; Life and Non-Life insurance business, €6,200,000 (EU Solvency II Directive)
Unavailable
Single-Parent
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
10.451526
51.165691
international
Text Link
Gibraltar
Unavailable
Unavailable
Unavailable
Unavailable
2-3 months
Unavailable
Unavailable
Solvency II in Financial Services Act 2019 and the Financial Services (Insurance Cos.) Regulations 2020; General Business (by class of business), £2,500,000 or £3,700,000; Long-Term Business, £3,700,000
Directive 2009/138/EC of the European Parliament and of the Council (Solvency II Directive)
Single-Parent; Group; Protected Cell/Segregated Portfolio companies; Special Purpose
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-5.353585
36.140751
international
Text Link
Guam
Unavailable
Unavailable
Unavailable
Unavailable
30-45 days
Unavailable
Unavailable
Single-Parent, $50,000; Group, $100,000; Industrial Insured (Stock), $150,000; Protected Cell, $150,000
Single-Parent, $100,000; Group (Stock), $150,000; Industrial Insured/Group (Mutual insurer)/Protected Cells, $200,000
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
144.793731
13.444304
international
Text Link
Hawaii
1987
14
$17,410,794,567
$34,500,000,000
30 days or less
Unavailable
Unavailable
Single Owner (Reinsurance only), $100,000; Single Owners (Direct & Reinsurance), $250,000; Multi-Owner (Association or Risk Retention), $500,000; Sponsored, $500,000
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
263
237
Unavailable
16
9
10
-155.582782
19.896766
us-onshore
Text Link
Hong Kong
Unavailable
Unavailable
HK$1,754,000,000
Unavailable
Unavailable
Unavailable
Unavailable
HK$2,000,000
Greatest of HK$2,000,000 OR 5% of the net premium income OR 5% of the net claims outstanding
Single-Parent
Unavailable
4
Unavailable
Unavailable
Unavailable
Unavailable
114.169361
22.319303
international
Text Link
Illinois
Unavailable
Unavailable
$5,900,000
Unavailable
Varies
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent; Association
2
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-89.398528
40.633125
us-onshore
Text Link
Ireland
Unavailable
Unavailable
€1,800,000,000
€7,900,000,000
6 months
Unavailable
Unavailable
Set by Solvency II directive based on the outcome of the Solvency II Own Risk and Solvency Assessment
Set by Solvency II directive based on the outcome of the Solvency II Own Risk and Solvency Assessment
Single-Parent
Unavailable
64
Unavailable
Unavailable
Unavailable
Unavailable
-8.24389
53.41291
international
Text Link
Isle of Man
Unavailable
Unavailable
£1,000,000,000
Unavailable
Approximately 8 - 12 weeks
Unavailable
Unavailable
Revised risk-based methodology; Restricted, £50,000 + 10% of net written premium up to £2,000,000 + 5% net written premium after £2,000,000; Reinsurance, £100,000; General, Greater of £150,000 or 15% of net written premium
Revised risk-based methodology; Restricted, £50,000; Reinsurance, £100,000; General, £150,000;
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
Unavailable
87
Unavailable
Unavailable
7
3
-4.548056
54.236107
international
Text Link
Jersey
Unavailable
Unavailable
Unavailable
Unavailable
6 weeks
Unavailable
Unavailable
£100,000 or at discretion of regulator
Property/Casualty, 17.5% of net premiums; Life, 2.5% of long-term business fund
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-2.13125
49.214439
international
Text Link
Kansas
1988
Unavailable
Unavailable
Unavailable
90 days or less
Unavailable
Unavailable
Single-Parent, $100,000; Industrial (Stock), $200,000
Single-Parent, $150,000; Industrial (Stock) $300,000; Industrial (Mutual) $500,000
Single-Parent; Association; Risk Retention Groups; Special Purpose Financial
1
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-98.484246
39.011902
us-onshore
Text Link
Kentucky
2000, updated in 2005
Unavailable
$129,000,000
$77,300,000
3 months
Unavailable
Unavailable
Single-Parent, $250,000; Consortium/Association, $500,000; Industrial Insured, $500,000; Sponsored, $500,000; Agency, $500,000; Special Purpose, $250,000
3:1
Single-Parent; Association; Group; Risk Retention Groups; Special Purpose
32
23
6
3
Unavailable
Unavailable
-84.27002
37.839333
us-onshore
Text Link
Labuan
Unavailable
5
$624,600,000
Unavailable
30 days
Unavailable
Unavailable
A paid-up capital of a Labuan company unimpaired by losses for the following:; Single-Parent/Group/Association/Multiple, RM 300,000; Rent-A-Captive/Cell, RM 500,000
General, The greater of surplus of assets over liabilities equal to or more than the working funds OR 20% of the net premium income for the preceding year; Life, The greater of surplus of assets over liabilities equal to or more than the working funds OR 3% of latest actuarial valuation of the liabilities
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose
Unavailable
37
Unavailable
Unavailable
26
32
115.2305
5.28311
international
Text Link
Liechtenstein
Unavailable
Unavailable
Unavailable
Unavailable
3 months
Unavailable
Unavailable
Premium $146,316,000
$13,600,000 by Solvency II requirements
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
9.555373
47.166
international
Text Link
Louisiana
2008
Unavailable
$424,164,915
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent: $500,000; Association: $1,000,000
Unavailable
Unavailable
3
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-91.962333
30.984298
us-onshore
Text Link
Luxembourg
Unavailable
5
Unavailable
Unavailable
3-6 months
Unavailable
Unavailable
Reinsurance Captives, €1,200,000; Commercial Reinsurer, €3,600,000
Unavailable
Single-Parent; Group
195
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
6.129583
49.815273
international
Text Link
Maine
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent, $200,000; Industrial Insured, $500,000; Association, $750,000; Risk Retention Group, $1,000,000; Sponsored Cell, $750,000
None
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups
3
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-69.445469
45.253783
us-onshore
Text Link
Malta
1997, updated in 2009
Unavailable
Unavailable
Unavailable
10 weeks
Unavailable
Unavailable
Solvency margin set in accordance with European Union directives
Solvency II requirements
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
14.375416
35.937496
international
Text Link
Mauritius
Unavailable
Unavailable
Unavailable
Unavailable
2 weeks
Unavailable
Unavailable
Single-Parent, MUR 3,000,000 (US $86,750); Class 1, MUR 5,000,000(US $144,600); Class 2 & 3, MUR 10,000,000 (US $290,000)
Unavailable
Single-Parent; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
57.552152
-20.348404
international
Text Link
Michigan
2008
Unavailable
$3,020,174,788
Unavailable
30 days
Unavailable
Unavailable
Single-Parent, $150,000; Single-Parent (Non-Profit), $250,000; Association/Group (Stock), $400,000; Association/Group (Mutual), $750,000; Industrial, $300,000; Homogenous Cells, $500,000 ($150,000 if <10); SPFV, $250,000
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
26
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-85.602364
44.314844
us-onshore
Text Link
Missouri
2007
4
$8,600,000,000
$16,300,000,000
30 days or less
Unavailable
Unavailable
Single-Parent, $250,000; Industrial Insured, $500,000; Association, $500,000; Branch, $250,000; Special Purpose Life Reinsurance, $250,000; Sponsored, $500,000
Discretion of regulator
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose Financial
55
44
1
Unavailable
1
1
-91.831833
37.964253
us-onshore
Text Link
Montana
2001
Unavailable
$508,760,000
Unavailable
2-4 weeks
Unavailable
Unavailable
Single-Parent, $250,000; Association/Industrial Insured, $500,000; Single-Parent Reinsurance, $125,000; Protected Cell (Homogenous), $500,000 ($150,000 if <10); Special Purpose (Commissioner’s discretion)
Series Captives only, 4:1 premiums to surplus
Single-Parent; Association; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose
262
84
Unavailable
7
154
17
-110.362566
46.879682
us-onshore
Text Link
Nebraska
Unavailable
Unavailable
Unavailable
Unavailable
30-45 days
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-99.901813
41.492537
us-onshore
Text Link
Nevada
1999
7
$380,000,000
Unavailable
30 days or less (if not RRG)
Unavailable
Unavailable
Single-Parent, $200,000; Association/Sponsored, $500,000; Agency, $600,000; Rent-a-Captive, $800,000; RRG, $1,000,000 (preferred minimum)
Unavailable
Single-Parent; Association; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; MicroCaptives
254
76
7
8
154
5
-116.419389
38.80261
us-onshore
Text Link
Nevis
Unavailable
Unavailable
Unavailable
Unavailable
10-14 days
Unavailable
Unavailable
Single owner, $10,000; Multiple Owners (2-4), $20,000; Multiple Owners (5+), $50,000
Unavailable
Single-Parent; Association; Group
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-62.5833
17.15
us-offshore
Text Link
New Jersey
Unavailable
Unavailable
Unavailable
Unavailable
30 days
Unavailable
Unavailable
Single-Parent, $250,000; Association, $750,000; Industrial, $500,000; Sponsored, $500,000
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-74.405661
40.058324
us-onshore
Text Link
New York
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
$250,000.00
Unavailable
Single-Parent; Risk Retention Groups
Unavailable
37
Unavailable
Unavailable
Unavailable
Unavailable
-74.005974
40.712776
us-onshore
Text Link
New Zealand
Unavailable
Unavailable
Unavailable
Unavailable
20 weeks
Unavailable
Unavailable
Only permits NZ based Captive insurers with insurance business in NZ.
Unavailable
Single-Parent
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
174.885971
-40.900557
international
Text Link
North Carolina
2013
49
$1,600,000,000
Unavailable
2-4 weeks
RRGs examined by NCDOI no less than every 5 years; Other Captive insurers: Not subject to an NCDOI examination schedule (NCDOI uses annual audit reports completed by independent CPAs). Non-RRG Captive insurers, NCDOI's examines when issues can not be resolved through other means.
Travel expenses of examiners
Single-Parent, $250,000; Association/Group, $500,000; RRG, $1,000,000; Cell, $250,000; SPFV, $250,000
Automobile Liability Writers, NCDOI maximum limit of 2:1 premiums to surplus; Other Insurers, Requirement varies depending on business plan
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
311
234
Unavailable
10
730
46
-79.0193
35.759573
us-onshore
Text Link
Norway
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
8.468946
60.472024
international
Text Link
Ohio
2014
Unavailable
$3,556,000,000
$6,200,000,000
30 days
Unavailable
Unavailable
Single-Parent, $250,000; Protected Cell, $500,000
Based on business model
Single-Parent; Protected Cell/Segregated Portfolio companies; Special Purpose Financial
Unavailable
8
Unavailable
Unavailable
Unavailable
Unavailable
-82.907123
40.417287
us-onshore
Text Link
Oklahoma
Unavailable
Unavailable
$403,240,000
Unavailable
Under 30 days
Unavailable
Unavailable
Single-Parent, $250,000; Association, $750,000; Industrial Insured, $500,000; Sponsored, $500,000; RRG, $1,000,000; Special Purpose & Branch, $250,000 (or determined by the Insurance Commissioner)
Unavailable
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
60
34
1
Unavailable
8
2
-97.092877
35.007752
us-onshore
Text Link
Oregon
2012
Unavailable
$1,082,000,000
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent, $250,000; Association, $750,000; Captive Reinsurer, $300,000,000
Unavailable
Single-Parent; Association
14
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-120.554201
43.804133
us-onshore
Text Link
Panama
Unavailable
Unavailable
Unavailable
Unavailable
90 days
Unavailable
Unavailable
General Terms, $150,000; Long-Term risks or both, $250,000
Unavailable
Association; Group
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-80.782127
8.537981
international
Text Link
Puerto Rico
Unavailable
Unavailable
Unavailable
Unavailable
20 days
Unavailable
Unavailable
Class 1 Single-Parent, $500,000; Class 2 Association, $500,000; Class 3 Protected Cell companies, $500,000 Preferred (No statutory requirement)
Single-Parent (Class 1), 5:1 or amount adjustable by surplus premium relationship to exposure; Association (Class 2), 5:1 or 3:1 regarding third party risk; Protected Cell company (Class 3), 3:1
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-66.590149
18.220833
us-offshore
Text Link
Rhode Island
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent, $100,000; Association, $400,000; Industrial, $200,000
R.I. Gen. Laws § 27-43
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-71.477429
41.580095
us-onshore
Text Link
Singapore
Unavailable
3
Unavailable
Unavailable
6 to 8 weeks
Unavailable
Unavailable
SG$400,000 (US $285,000)
Offshore General and Life Business, Assets must not be less than liabilities; Onshore General Business, Surplus of assets over liabilities equal to the highest of SG$400,000 OR 20% previous year's net premiums OR 20% previous year's claims liabilities
Single-Parent
87
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
103.819836
1.352083
international
Text Link
South Carolina
2000
Unavailable
$3,500,000,000
Unavailable
30 days or less
Unavailable
Unavailable
Single-Parent, $250,000; Industrial Insured, $500,000 (Stock); Mutual Surplus, $500,000; Association, $500,000 (Stock); Mutual surplus, $750,000; Sponsored, $250,000
Typically 3:1, not greater than 5:1. Depends on the nature, scale, and complexity of the insured risks.
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
221
73
1
48
29
13
-81.163725
33.836082
us-onshore
Text Link
South Dakota
Unavailable
Unavailable
Unavailable
Unavailable
30 days or less
Unavailable
Unavailable
Trust Captive, $100,000; All other Captive types, $250,000
Trust Captive, $100,000; All Other Captive types, $250,000
Single-Parent; Group; Protected Cell/Segregated Portfolio companies; Special Purpose; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-99.901813
43.969515
us-onshore
Text Link
St. Lucia
Unavailable
Unavailable
Unavailable
Unavailable
60 days
Unavailable
Unavailable
Class A(1), Greater of $100,000 and 10% of net retained annual premium; Class A(2): Greater of $150,000 and 20% of the first $5,000,000 of net retained annual premium + 10% of any net retained annual premium in excess of $5,000,000; Class B, $150,000; Class C(1), Sum of the margin required for Classes A(1) and B; Class C(2), Sum of the margin required for Classes A(2) and B
Unavailable
Single-Parent; Protected Cell/Segregated Portfolio companies
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-60.978893
13.909444
us-offshore
Text Link
Sweden
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
18.643501
60.128161
international
Text Link
Switzerland
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Single-Parent; Group
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
8.227512
46.818188
international
Text Link
Tennessee
1978, rewritten in 2011
Unavailable
$2,410,000,000
Unavailable
Less than 30 days
5 years, reduced if unaudited.
Unavailable
Single-Parent, $250,000; PCC, $100,000; Association/Industrial Insured, $500,000; RRGs, $1,000,000
No statutory guidance
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
165
97
2
9
555
57
-86.580447
35.517491
us-onshore
Text Link
Texas
2013
Unavailable
$11,800,000,000
$34,400,000,000
60-120 days
Unavailable
Unavailable
$250,000
Unavailable
Single-Parent
79
77
Unavailable
Unavailable
Unavailable
Unavailable
-99.901813
31.968599
us-onshore
Text Link
Turks & Caicos Islands
1989
Unavailable
Unavailable
Unavailable
4 weeks
Unavailable
Unavailable
$100,000 + Adjustment for company size/business line
Unavailable
Single-Parent; Group; Protected Cell/Segregated Portfolio companies; MicroCaptives
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-71.797928
21.694025
us-offshore
Text Link
U.S. Virgin Islands
Unavailable
Unavailable
Unavailable
Unavailable
45 days
Unavailable
Unavailable
Single-Parent, $75,000; Industrial Insured (Stock), $100,000; Industrial Insured (Mutual), $100,000; Association International (Stock), $125,000; Association International (Insurer), $125,000
Single-Parent, $100,000; Industrial Insured (Stock), $125,000; Industrial Insured (Mutual), $125,000; Association International (Stock), $125,000; Association International (insurer), $250,000
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose; Special Purpose Financial
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-64.896335
18.335765
us-offshore
Text Link
Utah
2003
38
$3,000,000,000
$7,073,725,450
1-2 weeks (initial review). Certificate of Public Good issued while process is completed.
5 years; All may qualify for audit-in-lieu of examination.
Unavailable
Single-Parent, $250,000; Industrial Insured, $700,000; Association, $750,000; Sponsored, $500,000 with $200,000 from Sponsor/Core
Traditional insurance guidance recommended as a best practice
Single-Parent; Group; Protected Cell/Segregated Portfolio companies; MicroCaptives
439
361
2
Unavailable
57
11
-111.093731
39.32098
us-onshore
Text Link
Vanuatu
Unavailable
Unavailable
Unavailable
Unavailable
2 weeks to 3 months
Unavailable
Unavailable
General insurance classes, $100,000; Life and Long-Term insurance classes, $250,000
Ratio of premium to capital, 3/4 to 1.
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
166.959158
-15.376706
international
Text Link
Vermont
1981
38
$31,000,000,000
$231,000,000,000
30 days or less (45 for SPFI)
5 years or more frequently as needed
Unavailable
Single-Parent, $250,000; Sponsored, $100,000; Association/Industrial Insured, $500,000; RRG, $1,000,000; SPFI, $5,000,000
No firm rules. Starts with 3:1 with explanation if different leverage is appropriate.
Single-Parent; Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose
659
405
15
85
534
62
-72.577841
44.558803
us-onshore
Text Link
Virginia
Unavailable
Unavailable
Unavailable
Unavailable
90 - 120 days
Unavailable
Unavailable
Stock companies, $1,000,000
Non-Stock companies $4,000,000
Single-Parent; Association
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-78.656894
37.431573
us-onshore
Text Link
West Virginia
Unavailable
Unavailable
Unavailable
Unavailable
60 days
Unavailable
Unavailable
Single-Parent, $100,000/$150,000; Association, $350,000/$350,000; Association (Mutual), $0/$600,000; Industrial Insured, $250,000/$250,000; Industrial Insured (Mutual), $0/$400,000
Unavailable
Association; Group; Protected Cell/Segregated Portfolio companies; Risk Retention Groups; Special Purpose
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
Unavailable
-80.454903
38.597626
us-onshore
Text Link

The Definitive Guide To Captive Insurance

Map View
List View
No results found
US Onshore
US Offshore
International
Comparison Selection
A
B
c
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
Back
Filter
Compare
State Name
Compare
Domicile Details:
Initial Passing of Captive Legislation:
N/A
Number of New Licences:
N/A
Latest Total Gross Written Premium:
N/A
Latest AuM:
N/A
Speed of Licensing:
N/A
Examination Cycle:
N/A
Capital Requirements:
Examination Fee:
N/A
Minimum Starting Capital Required:
Surplus Required:
Approved Captive Types:
Current Captive Count:
Total Captives (as of 2023):
N/A
Single parent:
N/A
Group / Association:
N/A
Risk Retention Groups:
N/A
Individual Cells / Series:
N/A
Sponsored Cells:
N/A
Filter by Captive Structure
Learn more about Captive structures and how to choose the right one
Single-Parent
(0)
Cancel
Apply
Details
Initial Passing of Captive Legislation
Number of New Licences
Latest Total Gross Written Premium
Latest AuM
Speed of Licensing
Examination Cycle:
Capital Requirements
Avg/Est. Exam Cost:
Minimum Starting Capital Required
Surplus Required
Approved Captive Types
Current Captive Count
Total Captives (as of 2023)
Pure/Single parent captives
Group/Association captives
Risk Retention Groups
Individual Cells/Series
Sponsored Cells
You haven't selected any Domiciles
Click here to go to the selection list
Your Selection
Filter
Comparison
Clear All
Captives 101
Actuarial
Advisory
Legal
Reinsurance
Regulatory

The Definitive Guide To Captive Insurance

Discover captive insurance: a strategic approach to risk management. Learn how captives offer control, customized coverage, and financial benefits for businesses seeking alternatives to traditional insurance.
Sam Espinosa
|
February 5, 2024
Single-Parent Captive
Group Captive
Agency Captive
Rent-a-Captive
Protected Cells
Series LLCs
Micro Captives
Risk Retention Groups
Branch Captive
Agency Captive
Owned by insurance agencies
Advantages
New profit center
Aligns interests
Enhanced client loyalty
Considerations
Not directly beneficial to insureds
Higher capital requirement
Potential conflicts
Use Cases
Revenue diversification
Customized insurance solutions
Enhanced client loyalty
Structure Details
Compare All

Introduction

Captive insurance empowers companies to craft their own strategic insurance solutions, potentially saving money and gaining greater control of their risk.

This guide provides the roadmap to navigate this powerful tool. It will walk you through the basics, ensuring a solid grounding in the concept and practice of captive insurance.

A Review of Traditional Insurance

Just like health or home insurance for an individual, when a business buys insurance, it pays an insurance company a fee (called a premium) in exchange for protection against certain types of losses.

When such a loss occurs, the business must file a claim. If the loss is determined to be covered by the insurance policy, the insurer issues a reimbursement. However, if the loss is not expressly covered by the policy, the claim is denied and no reimbursement is issued.

This traditional insurance system is a good deal for a business so long as the costs of their actual losses are more than the cost of the coverage.

But, the opposite is true for the insurance company, where the system only works if the amount they collect in premium is more than they pay out in claims. The relationship between premiums collected and claims paid is called the 'Loss Ratio.'  The 'Combined Ratio' (premiums collected vs. claims paid + operational expenses) is the ultimate indicator of profitability for an insurance company.

For an insurer, a combined ratio below 100% reveals the extent to which they are profitable. The lower the percentage, the bigger their profit.

Traditional Insurance vs. The Modern World

Today’s world of risk is increasingly dynamic and unpredictable. To remain operational amidst such uncertainty, insurance companies have dramatically increased premiums (particularly for certain types of insurance) to preemptively insulate their loss ratios. That is, they charge more for coverage to make sure there is money left over after paying out claims.

For businesses that routinely experience losses that still exceed the rising cost of their premium, the arrangement is well suited. But, for all of the other businesses that find themselves paying more for coverage (and often, a lot more) than their actual losses, something has got to give.

A New Approach: Captive Insurance

Captive insurance is a different way to protect a business against its risks, while using the same concepts of traditional insurance to build value. Here’s how it works:

First, the business designs the ideal insurance policy to cover their unique risks. Then, it determines the amount of premium needed to support that policy. But, instead of paying the premium to a traditional insurance company, the business creates a new company, its own insurance company, and pays the premium to it, instead.

Now, anytime there is a loss, it can be instantly reimbursed. No more claims hassle. And, because any unclaimed premium becomes profit for the captive insurance company (see: loss ratio above), the business actually retains the earnings instead of giving them away to an outside insurer.

In a way, captive insurance vs. traditional insurance could be understood through an analogy as the choice between renting and owning a home:

  • Traditional insurance is like renting. The rent (premium) can increase annually, and the lease (policy) may not be renewed by the landlord (insurer). But, there are no upfront costs beyond rent, and the cost of any major repairs are usually not the renter's responsibility.
  • A captive is like buying a home. There are upfront costs like a down payment (captive formation costs), and there are still mortgage payments (premium). But, the homeowner has more control; the home can be customized in any way. Over time, a homeowner also builds tangible equity.

The Benefits of a Captive

Consider this simple example:

Over time, and with good a combined ratio, the profits held by the captive insurance company become a formidable capital fund that can support the parent business in many ways.

The profits can be invested in the stock market, loaned back to the business, returned as dividends to shareholders or policyholders, and much more.

The Worst Case Scenario

But if a captive is so valuable, why doesn’t every business have one?

In truth, going captive is a complex, often complicated process. Over 10 professional services are needed throughout the process. Quite simply, most businesses outside of the Fortune 500 do not have the internal resources to confidently select the right vendors and make the right decisions based on their advice to successfully navigate the process.

However, for those who have decided a captive is a good fit, one specific concern looms large.

The most commonly expressed concern when considering a captive is:  “What if I experience losses that exceed the amount in my captive?”

The good news is that most captives incorporate Reinsurance to protect against this exact scenario. Reinsurance limits the financial exposure of a captive, and protects its surplus.

Reinsurance works a lot like regular insurance. You pay for reinsurance in the form of a premium, the price of which depends on the type and amount of coverage you need.

The captive uses its own funds to pay for losses up to a certain point, beyond which reinsurance steps in to cover the rest.

The threshold that triggers reinsurance is called the Attachment Point. Determining the proper attachment point is a vital part of captive program design, as it impacts not only the cost and availability of reinsurance, but the potential exposure to catastrophic loss of the captive itself.

With the right reinsurance strategy, even the worst case loss scenario for a captive in any given year (you spend 100% of what you put into the captive) is the guaranteed outcome with traditional insurance every year (100% of your premium is kept by the insurer).

And since every year is typically not the worst case scenario, the more likely outcome is that profits grow in the captive year over year, eventually maturing into a significant financial stockpile.

The Early Years

Still, a new captive is more vulnerable in its infant years, where significant losses, combined with a suboptimal reinsurance program, could deplete or erase the available funds. In this scenario, additional capital investment may be needed to maintain regulatory requirements. A sophisticated captive manager can dramatically reduce the likelihood of this scenario through proper planning and program strategy.

As a captives’ operating balance grows from retained earnings year over year, it steadily insulates itself from the losses within any single year and gains the financial flexibility to reduce the scope and cost of reinsurance.

How Reinsurance Works

Reinsurance needs are considered when determining the total premium for a captive, as the payment for that reinsurance can be drawn directly from the premium once the captive is funded.

When shopping for reinsurance, the captive can decide the type and amount of coverage needed, as well as the attachment point.

A higher attachment point might lower the cost of reinsurance (the captive will pay more out-of-pocket before reinsurance kicks in). A lower attachment point might cost more in reinsurance premium, but the captive will have to pay less out-of-pocket for a loss.  In this way, a business can incorporate their own risk appetite into the reinsurance strategy.

However, the reinsurance market can also dictate the range of options for a captive. The type or amount of coverage needed, the desired attachment point, and the specific loss history of the business will influence a reinsurer's willingness to write the policy.  This is where an experienced captive manager can help to navigate the reinsurance market and secure the ideal coverage.

Fun Fact:

Insurance companies actually leverage the exact same reinsurance system for the traditional policies they sell, it just happens behind the scenes. The insurance company takes a portion of the premium they receive from a business and send it to perhaps many reinsurers, each responsible for covering losses within agreed-upon dollar thresholds. For example, Reinsurer #1 might cover losses between $1-5M, where Reinsurer #2 covers losses from $5M-$10M, and so on.

Insurance companies leverage reinsurance to de-risk their own exposure. In the event of a major claim, no single party wants to be 100% responsible for footing the bill.

Navigating the reinsurance landscape can be challenging and time consuming, but the right captive manager will know the ins and outs to make the process go smoothly.

For a more in depth review of Captive Reinsurance, visit our blog to read How Captive Reinsurance Works.

The Anatomy of Captive Insurance

Practically speaking, a captive insurance company is just a bank account with a pair of licenses. Often, the company must secure a license from the state’s Secretary of State in order to operate (just like any other business). Second, the company secures an insurance license from the state’s department of insurance (in order to legally accept premiums and pay claims). The issuance of the insurance license is conditioned upon the completion of an application, an actuarial study calculating the proper loss cost for the insured, collateralization of the company, and other fact-specific steps depending on the complexity of the program.

The Genesis of Captive Insurance

The concept of captive insurance emerged as a solution for businesses seeking customized risk management. It was born out of necessity when traditional insurance markets were either too costly or did not cover specific business risks.

Captive insurance lore generally agrees that captive insurance emerged in the mid-20th century as the brainchild of Fred Reiss. He leveraged a self-insurance model to provide coverage for a company’s various insurance issues for mining and heavy industrial activities.

The success of his concept slowly spread through the alternative risk transfer markets and ultimately achieved ubiquity in the wake of the Humana v Commissioner case resolved in favor of the taxpayer in the late 1980’s.

Fast forward to 2023, and the largest corporations now dominate the captive landscape. Over 90% of the Fortune 500 use one or more captives. And, 70% of all captives are managed by the 10 largest captive management firms.

Captivating Value

Captives allow a business’ insurance budget to work double time. First, to cover any losses. Then, to earn profit from the surplus. Captives instantly transform an insurance liability into an asset, giving the business:

Total Control of Insurance

  • Design an insurance plan that rewards risk management performance. Then, the ability to keep the profit, fund growth, and benefit from potential tax advantages.

Tailor-Fit Coverage

  • The flexibility to customize coverage to match any risks, and close coverage gaps that are created by typical policy exclusions through traditional markets.

Funding For Growth

  • Surplus that can be used to reimburse operations, reinvest in growth, or launch profitable insurance services (like launching an Embedded Insurance program).

Better Risk Management

  • Aligned incentives that drive improvement in risk management strategy. When the premium surplus can be kept as profit, the business has a vested interest in taking steps to limit losses.

Instant, Easy Claims

  • No more frustration, delays, or denials from an insurance company when filing claims. Because a captive is designed by and for the business, there is no confusion surrounding which losses are covered under the policy.

Asset Protection

  • As a wholly-owned subsidiary, a captive insulates a business and its assets from its risks.

Examining captive insurance from a financial perspective, the structure allows for potential savings, direct access to reinsurance markets, and efficient use of capital.

Captives are long-term, strategic risk management vehicles. This is because each year, the surplus can be retained by the captive, and compounded the following year. Over time, the captive fund builds into a powerful financial resource that can be used to support the growth of the parent business. Consider the chart below that displays the performance of a captive after 5 years of operation:

Want to explore the various influences on Captive performance? Take The Quiz. Then, log into your account to gain access to the Captive Simulator. Adjust the annual premium or total claims to refine your results.

Types of Captives

There are many types of captive insurance companies. Single-parent captives, group captives, and micro-captives represent the most common. Each serves different business structures and risk profiles. The primary distinction between each type of captive is how the business entity is structured and governed.

Let’s use an analogy to explain the most common structure types, and why they are used:

Pretend that ACME Company is creating ACME Hotel (A Captive).

Single/Pure Captive: ACME company owns the entire hotel.

This arrangement provides ACME with the most control and 100% of risks and benefits. It is the most difficult and expensive to set up, and carries the most ongoing responsibilities.

Group Captive: ACME and a group of other companies join together to buy the hotel.

This arrangement spreads the costs across multiple owners, making it less expensive to start and operate. But, it can also increase risk. Something that happens on one floor can impact other floors.

Segregated Cells: ACME owns the hotel, but sells (or rents) an ownership stake in the rooms, to any number of other companies.

This arrangement makes it easier for ACME to profit from the hotel, and makes it much easier for other companies to join the venture and share in the benefits with far fewer requirements.

Setting Up a Captive

The process of setting up a captive involves several milestones, and a variety of professional services.

Milestones

  • Choosing a domicile
  • Meeting capital requirements
  • Feasibility study
  • Reinsurance / Fronting Needs
  • Regulator approval
  • Ongoing management
  • Annual compliance

Pro Services

  • Legal
  • Actuaries
  • Advisors
  • Regulators
  • Audit & Tax
  • Accountants
  • Investment
  • Reinsurance
  • Claims

To fully explore the process of planning, forming, and managing a captive, click here.

Tax Considerations

Captives can provide tax benefits under certain conditions, such as the ability to deduct premiums and the exclusion of income for small insurance carriers under specific premium thresholds. Unlike traditional insurance premiums, which are considered expenses, premiums paid to a qualified captive are deductible as business expenses for the insured entity. This reduces taxable income, potentially leading to significant tax savings. Investment income within the captive can grow tax-deferred until distributed, offering a potential growth advantage. Captives established in certain jurisdictions or domiciles with favorable tax laws can offer additional tax advantages.

Small captives meeting specific premium thresholds can enjoy tax-exempt status on underwriting profits, further boosting their financial attractiveness. For instance, the IRC 831(b) election provides the opportunity for a captive insurance company to elect not to be taxed on underwriting profit earned within a calendar year. This election is open to captives writing less than $2.8 million in premium (as of 2024, indexed to inflation). However, it should be noted that these captives are often frequent targets of IRS litigation and can be seen as aggressive tax avoidance strategies if not complaint and properly managed by professionals.

Challenges and Considerations

While captives offer numerous benefits, they also come with a few challenges.

Orchestrating the cooperation of nearly a dozen professional services and meeting potentially high capital requirements can certainly complicate and prolong captive formation. Then, once operational, managing the day-to-day operations, regulatory scrutiny, unpredictable reinsurance markets, and emerging risks may also test viability. Businesses should be aware of these challenges and have a plan in place to address them before getting started.

Conclusion

Captive insurance is a strategic choice for companies looking to take control of their risks and potentially improve their related financial outcomes. With the right approach and expert guidance, a captive can be a powerful tool for business resilience, innovation, and growth.

If you are considering a captive, ask yourself this single question:

Does our business pay more for insurance premiums than we claim in losses?  If the answer is yes, a captive might be the best way to solve your insurance problem.

Want to know for sure? Take Our Quiz.

In just 5 minutes, you will receive an instant XN Captive Star Rating to indicate how well-suited your business is for a captive.

By creating an free account, you'll also gain access to in-depth analysis that includes:

5 years of simulated financial data, including your captive’s potential:
  • Premium level
  • Expected losses
  • Administration fees
  • Operational expenses
  • Reinsurance pricing
  • Annual surplus
  • Cumulative earnings
  • Investment income

Join Our List
Enter your email address to find out when we release new features and content! 
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Ready to get started?
Take the quiz
Related Articles
Level 
Level 3
Claims
Audit
Regulatory
Investment
Legal
An Interactive Guide To Captive Domiciles
Choosing the right domicile is crucial for your captive's success. This interactive tool and supporting guide allows you to review and compare domiciles, learn how to evaluate them, and simplifies an otherwise complex decision.
Sam Espinosa
|
September 27, 2024
Level 
3
Captives 101
Advisory
Claims
Captives & Claims: How To Select a Third-Party Administrator (TPA)
Choosing the right TPA is vital for optimizing captive insurance programs. This guide covers key factors like due diligence, claims technology, and collaboration to enhance performance and compliance.
Chris Boedecker
|
November 25, 2024
Level 
Audit
Advisory
Legal
Regulatory
Captives & The IRS: A Landmark Battle Reshaping Captive Insurance Law
Avrahami v. The IRS teaches crucial lessons on compliance, structure, and transparency in captive insurance.
XN Captive
|
July 31, 2024
Level 
1
Captives 101
Claims
Advisory
Investment
Captives: From Renting to Owning Your Own Insurance
With traditional business insurance, you're renting protection. With captive insurance, you design, build, then own your insurance dream home. Find out how.
XN Captive
|
July 19, 2024
Level 
1
Captives 101
Reinsurance
Advisory
How Captive Reinsurance Works
Explore captive insurance reinsurance strategies. Learn about Excess of Loss, Aggregate, and Quota Share policies. Understand how reinsurance protects captives from major losses.
Sam Espinosa
|
March 8, 2024
Level 
2
Captives 101
Regulatory
Advisory
Legal
How To Choose The Right Type of Captive Structure
Explore the 9 main captive insurance types and learn the pros and cons of each structure to optimize your risk management strategy.
Sam Espinosa
|
August 6, 2024
Level 
2
Actuarial
Advisory
SIGMA Actuarial Q&A With XN Captive
SIGMA Actuarial Consulting Group interviews XN Captive on the advantages of captive solutions, the evolving market, and how businesses can leverage captives to drive growth and resilience.
SIGMA Actuarial Consulting Group
|
November 21, 2024
Level 
1
Captives 101
Actuarial
Advisory
Legal
Reinsurance
The Definitive Guide To Captive Insurance
Discover captive insurance: a strategic approach to risk management. Learn how captives offer control, customized coverage, and financial benefits for businesses seeking alternatives to traditional insurance.
Sam Espinosa
|
February 5, 2024
Level 
1
Captives 101
Actuarial
Advisory
Legal
Reinsurance
The Feasibility Study: What To Expect
“That makes perfect sense. I still don't understand.” This brief exchange with a real client neatly sums up captive exploration: simple in concept, complex in practice. Forming a captive means that your business will own an insurance company, pay for its own losses, and pocket any profit. The “what” makes sense. The “how” is more tricky.
Sam Espinosa
|
April 12, 2024
Level 
Captives 101
What Is Captive Insurance?
An explainer video with a simple way to understand captives as a choice between renting and owning your insurance.
XN Captive
|
July 4, 2024
Level 
1
Captives 101
Reinsurance
Regulatory
Advisory
What Is Fronting Insurance for Captives?
In the insurance industry, the term "Paper" is often used to describe both the insurance policy itself and the carrier underwriting that policy.
Judah Max Dobrinsky
|
March 27, 2024