- Risk Management Strategies
- Property & Liability Coverage
- Claims Management Advocacy
- Coordination of Coverages
Micro Captive Insurance
Is Micro Captive Insurance Right for Your Business?
Alternative Risk Transfer Strategies
Traditional risk transfer techniques involve purchasing conventional, guaranteed-cost insurance policies. Although this provides effective risk transfer, it offers little control over your claims and rising premium costs. Micro Captives are an effective, efficient and tax advantaged alternative.
Micro Captive Benefits
- Greater control and management of claims
- Reduced expenses
- Customized coverage not otherwise available in the standard market
- Enhances and integrates with existing insurance policies to fill any gaps in coverage
- Can supplement a Group Captive
- Facilitates recapture of premiums not used to pay claims
What Is a Micro Captive Insurance Company and How Does It Work?
A Micro Captive is a captive insurance company operating with an annual gross premium up to $2.2 million. In the United States, qualified under Internal Revenue Code 831(b), a Micro Captive will pay tax only on investment income and not on underwriting profit. The underwriting profit can either be returned as a dividend or subject to limitations prescribed by the IRS, remain in the captive as surplus. The Micro Captive must qualify as a bona fide insurance company and serve a business purpose.
IRC Section 831(b) provides that:
- Insurance companies with less than $2.2 million of annual premium (as adjusted for inflation) pay $0 income tax on insurance profits.
- Investment income is taxed as income to C-corporation
- 831(b) must be timely elected and cannot be revoked without the submission to and approval by the Secretary of the Treasury
Taxation (Consult with your Tax Advisor)
- Premiums are deductible when paid under IRC Sections §162 and §212
- Income tax on investment income only
- Minimum premium taxes
- Dividends are taxed as qualified dividends
- Termination surplus are taxed as capital gains
Is an 831(b) Micro Captive Suitable for You?
To help determine if a Micro Captive is right for you, CohnReznick Benefits Consultants will perform a full review and actuarial analysis of your current program (including incurred and realized claims). Our certified insurance counselors will deliver a feasibility study that forecasts your risks and potential to obtain necessary coverage and capture savings through a Micro Captive Plan.
Micro Captive Insurance Company Coverage and Policies
The insurance in a Micro Captive is customized coverage designed to expand, complement, and close gaps in existing insurance policies.
Examples of Micro Captive Coverage:
- Everything a Business Currently Self-Insures:
- Losses in excess of traditional limits
- Environmental Liability
- Loss of Income as a Result of Insurable Risks:
- Losing key employee/salesperson
- Loss of license/professional risks (professionals)
- Loss of a Key Contract Resulting from Insurable Risks:
- Liability Defense Expenses:
- Employee lawsuits - sexual harassment, wrongful termination, discrimination, etc.
- Professional claims
Examples of Micro Captive Policies:
- Professional Liability Gap Coverage
- HIPAA/Billing Audit Liability
- Contractual Liability
- Cyber Liability
- Environmental Liability
- Excess Environmental Liability
- Labor Shortage/Strike Loss
- Employment Practices
- Employee Dishonesty
- Patent Infringement/Intellectual
- Property & Liability:
- General Liability Gap
- Property Management Professional
- Professional Misconduct
- Product Recall
- FDA Administrative Actions Liability
- Product Liability Gap
- Directors and Officers Liability
- Punitive Damages
- Loss of Key Employee
- Wind Deductibles on Property
Take Control and Increase Your Bottom Line with an 831(b) Micro Captive
Contact one of our risk advisors to learn more about the lower costs, broader coverage and greater control that can be yours with Micro Captive Insurance.