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Captive Insurance 101

A "captive" is a property and casualty insurance company specifically established to insure the risks of an associated business. Owning your own captive insurance company comes with advantages that help you gain better control over your business’s risk management, earnings, and tax planning. Conventional insurance policies often limit or exclude coverage for certain inherent operational risks.

With captive insurance, these risks can be written right into the policy, free of vague or ambiguous language. Under IRC 831(b), middle market organizations can take advantage of both the primary benefits of captives, including tailor-made risk coverages and secondary benefits, such as improved tax planning. Capstone is the leading alternative risk planning company for the mid-market and we’re continuing our 17-year trend of growth and leadership in the industry. While other captive insurance managers disclaim tax and legal services, we offer a comprehensive alternative risk financing program in collaboration with The Feldman Law Firm LLP. We invite you to explore all the benefits of captive insurance and the turnkey services we provide.
Learn more about forming Captives >>.

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Important News You Should Know About
Blue Bell LayoffsNew Services from Capstone Associated, Houston TX

How Blue Bell Could Have Avoided 2850 Layoffs with a Captive

May 20, 2015 (Houston, TX) - - The Wall Street Journal reports that family owned Blue Bell Creameries LP has laid off 750 full-time and 700 part-time employees, and has put another 1,400 on a partially paid furlough. Blue Bell has also reduced salaries for its remaining staff. These actions come after a voluntary recall of its products following its ice cream being linked to a listeria outbreak that resulted in three deaths and additional illnesses spread across several states. Read the full story here.

Product recall insurance written under a captive insurance arrangement would have mitigated the costs by reducing out of pocket expenses for these unexpected losses. This is an ideal use of a captive insurance arrangement. An alternative risk management program which includes a captive is a proven strategy for mitigating these types of risks. In affiliation with The Feldman Law Firm LLP, Capstone has implemented tailored risk programs across many industries, including in the food manufacturing industry, over the last 17 years.


Captives on IRS' List of Abusive Tax Schemes?Captives in the IRS' Dirty Dozen List of Abusive Tax Schemes? Get the Facts
February 10, 2015 (HOUSTON, TX) - In the first quarter of each year, the IRS increases the volume of its press releases in a thoughtfully designed program to spur taxpayer compliance with our income tax system. This is a well-reasoned effort by the IRS.


Gallagher Captive Manager Artex discloses it's subject to IRS probe
Artex Risk Solutions Inc., the Bermuda-based captive management subsidiary of insurance broker Arthur J. Gallagher & Co., has confirmed that it is involved in an Internal Revenue Service probe into captive insurers formed under 831(b) of the Internal Revenue Code.

September 10, 2014 Federal Court Opinion Ordering Artex's Compliance with IRS Subpoena
The Internal Revenue Service (IRS) is conducting an investigation of Respondent Artex Risk Solutions, Inc. (Artex). The IRS is allegedly
examining Artex’s role in transactions involving captive insurance plans under 26 U.S.C. § 831, and investigating whether such transactions constitute abusive transactions.

Artex Docket Report
Petition to enforce IRS summons filed by United States of America (Shoemaker, Martin) (Entered: 06/03/2014)

The “Captive Manager” Fallacy Continues
The captive insurance community is aware of a series of IRS audits over the last decade years directed at small captives operating under Section 501(c)(15) of the Internal Revenue Code (IRC). The IRS undertook a series of audits to test compliance with the 2004 legislative changes.

Case Study: How One Company Thwarted International Risk with a Captive
We live in a global marketplace connected by imports, exports, and the outsourcing of needed services. Domestic risks to which U.S. companies are exposed are generally understood and can be managed through commercial insurance. International risks are much more difficult to manage and commercial insurance is expensive, especially for middle market companies.

What is a Captive Insurance Company?
A captive is a small property and casualty insurance company usually formed by a business owner to provide property and casualty insurance for the related businesses. The policies may either supplement or replace existing conventional coverages. Often the captive is best used for unique, industry specific coverages not readily available in the conventional markets. Learn what captive insurance companies are and how they can help you manage business risks.

Top Benefits of Captive Insurance Companies
Stewart A. Feldman, CEO and General Counsel of Capstone Associated Services, Ltd., was recently interviewed for The Entrepreneur Podcast Network, an Internet radio program with over 17,000 listeners internationally. Listen to the podcast, or read the interview entitled, “Captives: Why Own Your Own Insurance Company?” in this article:

How a Captive Insurance Company Works
Smaller companies are increasingly copying a method to control insurance costs that used to be the domain mainly of large businesses: setting up insurance firms to provide coverage when they think outside insurers are charging too much. After a string of catastrophes in recent years -– the terror attacks in the U.S. in 2001 and London in 2005, as well as Hurricane Katrina in 2005 –- a number of small and midsize public companies are putting more thought into how to get the most insurance protection at the best costs.

Why Businesses Should Form Captive Insurance Companies
Owners of middle market businesses are attracted to the cost saving, risk management, and profit potential provided by owning their own insurance company. In a recent interview, Stewart A. Feldman, chief executive of Capstone Associated Services, a Houston-based firm specializing in alternative risk planning for closely held businesses, explained: “Many middle-market businesses needlessly ‘self-insure’ a wide range of risks. By self-insurance, I mean ‘pay directly out-of-pocket as losses are incurred’. This is an inefficient and dangerous approach to risk planning.”

How to Build Value with Your Captive
A captive insurer makes profit in two ways: (1) through underwriting activities (premiums minus claims) and (2) investment activities. A captive insurer must comply with the investment requirements prescribed by the insurance regulator of the licensing domicile. Typically, the regulator restricts investments that impair the solvency or liquidity of the insurer.