The Basics

  • A micro captive is a real insurance company, with reserves, surpluses, policies and claims, formed by a business owner(s) to insure and underwrite the risks of their operating company (or multiple operating companies).

     

  • The operating company pays premiums to the captive and the captive insures the risks of the operating company. The premiums paid must correlate with the underlying risks.

     

  • A micro captive DOES NOT replace your existing insurance, but is tailored to work in conjunction with and enhance your existing insurance coverages.

     

  • A company commonly forms micro captives to insure uninsured or underinsured risks other than standard market exposures (such as workers comp, property / equipment, auto and general liability).

     

  • A micro captive provides a mechanism for the company to finance and plan for their self-insured risk and retain profit from policies otherwise insured in the traditional market.

     

  • An 831(b) micro captive is an election created by the federal government to allow companies to pay for uninsured or underinsured (self-insured) risks with pre-tax dollars.

     

  • Micro captives with less than $2,300,000 in net annual premiums (indexed for future inflation) and which meet certain diversification requirements and are adequately capitalized may elect to be taxed under Internal Revenue
    Code §831(b).