Captive Insurance Companies: What Your CPA Isn’t Telling You

As a business owner, it is your job to ensure that your company remains financially secure. Enlisting the services of an experienced CPA to handle corporate tax-related issues is a delicate task, since the level of tax liability can make or break the financial standing of the company. This kind of work is typically embedded into the service offering of the accounting firm that you choose. But the corporate climate necessitates that CPAs bring REAL solutions to the table in addition to basic tax compliance duties, such as filing tax returns or conducting audits.

So what has your CPA done for you lately? Has he or she talked to you about captive insurance companies or are they keeping this information under wraps? When assessing your overall business plan, does your CPA “get it?”

The hard truth is that many CPAs are stuck in a rut, working to meet corporate tax return deadlines. They’re hustling to meet quotas.  And can we blame them? After all, senior accountants work hard to ensure that business owners take advantage of tax benefits. They look through tax forms with eagle eyes, maintaining adherence to domestic and international tax law. But can they offer something else? Something that goes against convention? Something…noteworthy? As it turns out, the strategies that your CPA should be telling you about often go by the way side due to other, basic accounting obligations. They’re working at top form in some regards, but lack the time management skills to tell you about tools and mechanisms that can truly help your business thrive.

Consider this: It’s absolutely true that the term “trusted advisor” gets thrown around at company shin-digs and on the Web.  It’s a concept that has become both a caricature and an ideology for those firms that have the tenacity to deliver exceptional consultative services to clients, but lack the bandwidth to execute it effectively. Becoming a trusted financial advisor requires time, research, education, and delineation.

Talking about forming a captive insurance companyas a sophisticated business planning strategy means first, knowing it’s available to midmarket businesses. Traditionally, captives were formed by large mega-businesses. But under IRC Code 831(b), midmarket businesses can form captive insurance companies of their own.

Why Form Captive Insurance Companies?

By forming a captive, business owners can cover non-standard risks and take advantage of ancillary benefits, including improved tax planning. Covering risks is integral to keeping your business financially sound and self-insure risks by way of tailor-made coverages can actually save money in the long run as conventional coverages may not cover all risks and they might carry detrimental exclusions.


CPAs and Captive Insurance CompaniesLearning about what’s available to you as a business owner can help you thrive in this post-recession economy. Your CPA should be able to provide you with alternative risk planning strategies that can protect your business from operational and financial risks and provide substantial business planning efficiency.

What’s In It for Your CPA?

Your CPA may have a burning desire to live up to the fame of being your sole financial confidante. They want to be the person you look to for outside-the-box strategies that put them head and shoulders above the competition. But time management as a CPA is hard. Plus, many grapple about whether or not to include these business planning discussions in their standard service packages. Talking to clients, especially to midmarket business owners about captive insurance companies and their advantages can actually improve business. Most of the CPAs that we work with don’t bill captive insurance consulting as a separate service because they are adding value and solidifying relationships. Clients are poking in, reading about the gains that the captive industry is making. They are looking to CPAs for information.  When they don’t get it, they go elsewhere.

Some CPAs are fearful of talking about captives with their clients because they feel they’ll lose business. Truth is, when an operating business owner decides to take the plunge, the accounting work does not automatically shift to the captive management company. Tax-related work can still be billed by the CPA. Ultimately, breaking out of their regular routine and going above and beyond compliance only requires the desire to do so.

So next time you meet with your CPA, ask them question: “What’s all this I hear about captive insurance companies?”

The answer you get will provide insight as to the services you’re paying for. It’s up to you to decide whether or not it is up to your standards.

Did you like this post? Check out our blog on How you can avert supply chain risks.