Introduced what a Captive insurance company is. It allows a business to own and operate its own insurance company to cover underinsured and uninsured risks.

We shared a bit of history of captives as they date back to the 1960’s. We also discussed Delaware being a major player in the captive insurance industry as they domiciled their first captive in 1984 and went through a complete modernization in 2005 and as of 2019 were the number 3 writer of captives in the US and were number 5 globally!

We also mentioned that there are 3 different types of captives: Single, Group, and Micro. Single captives are directly owned by the parent company. A group captive is created by several companies of the same industry that are not large enough to form their own individual capital, but want to share and spread the risk as well as keep costs down in order to start and fund a captive. Micro captives fall under regulation 831b in the tax code and they allow smaller companies to insure what are termed Enterprise Risks, such as Supply Chain, Business Interruption, and Warranty type programs.

Also discussed was the top places to domicile a captive insurance company, as not all states have captive insurance laws. Maryland, Pennsylvania, and Virginia do not have captive insurance laws and New Jersey is very limited.

Lastly, we reviewed that Captive Insurance Managers act in a very similar capacity as third party administrators do with a 401k. Different captive managers have different requirements to form a captive insurance company and work directly with the companies tax and legal advisors, while some others have more of a turnkey approach, especially for the smaller, micro-captive type companies.

This was the first part of what will be a 4 part series. More on that to come.

Thanks!

Scott Tuozzolo
Agency Principal

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