While many midsize businesses are now enjoying the same advantages Fortune 1000 companies have found in maintaining captive domiciles, a captive is not an appropriate self-insurance tool for every company.
Only a careful examination of financial, tax and state regulatory factors will determine whether—and how—a company should form a captive, experts say.
Those considerations are as critical for midsize companies with captives eligible for Section 831(b) treatment under the U.S. tax code as they are for larger companies. (Under Section 831(b), an insurer that generates $1.2 million or less of annual premium volume is taxed only on its investment income, not its underwriting profit.)
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