Flexibility of Captive Insurance Planning

Size does matter. As a business expands, so can its exposure to risk. The size of your captive insurance company (as measured by premium levels) should adequately reflect the growth and related risk exposure of your business.

Capstone Associated Services specializes in providing customized captive insurance planning solutions for closely held businesses. The size and structure of your captive insurance company can be modified and updated in response to the invariable changes in your business activity and resulting risk exposures.

Capstone designs and manages captive insurance companies that fall under one of two separate provisions of the Internal Revenue Code:

  1. Small Captives, which fall under section 501(c)(15) of the Internal Revenue Code, comprise of insurance companies with premiums <$600,000, where both investment income and underwriting income (premiums) are tax exempt.
  2. Intermediate Captives, which fall under section 831(b) of the Internal Revenue Code, represent insurance companies with premiums <$1.2 Million, where only underwriting (premium) income is tax exempt, and investment income is taxable.

If your business profile has changed significantly over the past few years, whether positive or negative, the resulting changes in your risk exposures could mean that you may need to expand your coverages and perhaps restructure your planning to accommodate a larger captive. Similarly, if your business has slowed, you may want to restructure to a smaller captive.

One of the key reasons our many middle-market clients establish their own captive insurance companies is to have flexibility and greater control over their risks. As your business experiences change and continue to expand or contract, it may be time to have Capstone re-evaluate the corresponding changes in risk exposure and its application to the size of your captive insurance company.

You may want to consider a few captive planning options:

  1. Expand your small captive to an intermediate captive
  2. Add one or more additional captives
  3. Restructure your intermediate captive to a small captive

As part of our turnkey process, Capstone provides the ongoing underwriting, risk management, and on-going involvement of designing, pricing and administering insurance coverages, as well as interfacing with regulatory authorities.

It is not uncommon at some point in the captive's life cycle that the size and structure of the company is expanded to an intermediate captive, or contracted to a small captive, in order to maximize benefits to the insured.

Restructuring your captive insurance company and updating your resulting coverages is as easy as setting up your first captive. If you think you may qualify, contact us to determine whether a revised feasibility study is appropriate or necessary.

Fast Captive Insurance Facts

  1. 80% of the S&P 500 Utilize Captives
  2. More than 5500 Captives are in operation worldwide
  3. The Alternative Risk Planning Market generates @ $18 billion in annual premiums while the Conventional Market generates @$12 billion annually.