Corporate & Securities Law Alert: September 2013 - Captive Insurance: A Niche for the Middle Market


With insurance premiums on the rise and the uncertain state of the federal tax system, middle market business owners may be looking for a source of stability that allocates the risks associated with operations. A “small” captive insurance company may provide such stability. Small captives are a unique way for a closely held, middle market business to take advantage of cost savings, tax planning and business succession planning all in one.

The idea of a captive insurance company has been around for a while. A captive insurance company is a company formed for the purpose of underwriting property and casualty insurance to a related insured. In other words, a captive insurance company is a way for a business to self insure against the risks of operations. A captive insurance company normally must be formed as a “C” corporation for tax purposes and is subject to subchapters L and C of the Internal Revenue Code (“IRC”). Effectively, a captive insurance company provides an alternative mechanism for a business to shift the risks of operations.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ruskin Moscou Faltischek | Attorney Advertising

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