CPA Partnerships in Captive Insurance Planning

Bringing the Captive Discussion to Mid-market Clients

Filing tax returns is par for the course as a CPA. However, mid-market business clients are looking to their CPAs to bring meaningful, actionable financial and tax planning strategies to the table. Captives check all the boxes – They’re first and foremost, a risk coverage solution, meant to fill gaps in commercial coverage. Uninsured risks must exist inside the business for a captive to be properly formed.

More specifically, a “captive” is an insurance company that has been specifically formed to insure the risks of an affiliated business. Captives are fast-becoming one of the most sought-after risk funding strategies for the mid-market.

Additionally, captives formed under 831(b) of the Internal Revenue Code are eligible for powerful ancillary financial benefits, such as a 0% Federal income tax rate on the captive’s underwriting profits. Other financial benefits include dividends, secured loans from the captive to the client’s operating company, and better financial efficiency.
The 831(b) provision is rooted in the tax code and substantially reduces overall cost obligations for a business. And as of January 1, CURRENT_YEAR, the cap on premiums is CURRENT_PREMIUM_CAP million and is indexed for inflation. These funds accumulate inside the captive over time, offering business owners a source of funding for operational needs. This is in addition to tailored risk coverage, which may be expensive or unavailable through the commercial markets.

Bringing captives into your discussions can strengthen your business relationships and solidify your position as a trusted advisor. When structured in compliance with regulatory and IRS requirements, a captive insurance company is a powerful and practical risk management solution.

Starting the captive discussion with clients is the first step in promoting true financial resilience in the case of a loss. It showcases a CPA’s broad expertise in both the risk coverage and financial matters that are important to businesses. CPAs can distinguish themselves from their peer advisors by establishing themselves as solution-providers, rather than solely product vendors. Partnering with a multi-disciplinary captive management team will round out the support required for a well-designed, well-run captive.

The Mutual Benefits of Captive Insurance Planning

The work of CPAs is exhaustive, consisting of tax document preparation, strategic business counseling, and financial planning. These services and more position them as the backbone of sound financial decision-making. CPAs who bring captive planning to their clients can increase their value billings, strengthen business relationships, and enhance their reputations as solution providers.

Clients will fill gaps in their insurance coverage with those underwritten by the captive and leverage the many financial benefits of alternative risk planning. In addition to the risk coverage benefits, the potential asset protection benefits combined with Federal tax incentives promote ongoing financial efficiency. Business owners will be able to use their captive’s underwriting profits as investment income and can potentially use their capital to invest back into the company.

The ideal captive insurance client is a business owner or group of owners with a substantial operating business that has meaningful uninsured or underinsured risks. The operating business would ideally have at least MIN_NET_INCOME in pre-tax profits before partner distributions, bonuses, and other forms of compensation.
Captive Insurance is a win-win for both CPAs and their clients.

Partnering with Capstone

Advisors, including CPAs, are invited to work collaboratively with Capstone Associated Services, Ltd. to offer captive insurance planning to their clients. In your role as the CPA, you’ll retain control over tax returns and other tax matters. As a partner in the planning, Capstone’s in-house team of insurance, tax, and legal professionals will consult with you throughout the life of the captive, providing information on new developments.

Our team does not disclaim tax and legal—Capstone stands apart by offering a true, turnkey solutions which offers support in almost every facet of the planning.

Partner with Capstone. Contact us today for information.

Quick Facts:

  • As a trusted advisor for captive planning, you’ll remain a key point of contact for your clients.
  • You’ll have a team of tax and insurance professionals on your side as well as a legal team that will help with the formation and management of captives for your clients.
  • After you speak with your clients, Capstone and key agency staff will present the concept to them and ultimately conduct a feasibility study to determine what uninsured risks exist within the business.
  • Ultimately, we’ll work together to help determine whether a captive insurance company is right for your clients.
  • We’ll always keep you up-to-date on all new captive insurance-related tax, legal, and regulatory developments.

About Capstone

Capstone Associated Services, Ltd. is the most integrated and comprehensive outsourced provider of captive insurance services for the middle market. We are among the largest in the industry offering stand-alone, single parent captives. In cooperation with The Feldman Law Firm LLP, Capstone administers property & casualty insurance companies that provide alternative risk financing services throughout the U.S. Now in its CAP_YEARS_SUPER year, Capstone provides turnkey services usually under a joint engagement with its affiliated law firm to manufacturers, distributors, service providers, and professional organizations.

Capstone's own staff of insurance professionals includes Chartered Property & Casualty Underwriters, Associates in Risk Management, claims managers, underwriters, accountants and administrators, in addition to The Feldman Law Firm LLP's tax, corporate, financing and regulatory lawyers, which are bolstered by outside CPAs, risk managers, property & casualty professionals, and actuaries. Capstone's staff includes six CPCUs with more than 130 years of experience. Together, this team offers middle market companies the most comprehensive risk planning solution available. Today, captives are the premier risk management and risk-financing tool for qualified middle market companies.

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