The RH CPAs Captive Insurance Group has partnered with several diverse groups of captive insurance companies, offering cost effective ways for business owners to transfer their business risks. A captive insurance company is a closely held business which insures risks primarily for its owners or operating affiliates. Tax laws prevent ordinary companies from keeping large reserves for future losses. Captives have long been used by larger corporations to protect themselves from risks that were underinsured or uninsurable in the common marketplace. Owners have more flexibility in the underwriting, claims and investment process.

Captives may be domiciled domestically or off-shore. There are many factors to consider when deciding where to domicile a captive, such as regulation and cost of ownership. The state, jurisdiction, or domicile need not be the same as the owner or operating company. It is important to consult with a professional in order to determine the most favorable jurisdiction for your captive.
Some of the reasons to use a captive include the following:

• Lower cost of insurance
• Avoid price fluctuations of commercial carriers
• Higher control of operations and cash flow
• Obtain coverage not easily obtainable in the marketplace
• Potential tax savings for smaller captives
• Asset protection
• Estate planning

In recent years, the formation of 831(b) captives has been popular due to significant tax savings and retirement planning benefits. If gross premiums for a tax year are less than $2,300,000, then the company may make an election to be taxed on investment income only (831(b) election). Premiums paid by the owner or operating company are 100% tax deductible. The income is deferred by the captive and taxed at a more favorable capital gains rate when money is distributed to the owners. If the owners of the captive are heirs of the owners of the operating company, wealth is transferred without gift or estate tax implications. This also provides an effective means of asset protection for the operating company.

Today’s business climate requires insurance organizations to employ a systematic approach to meet evolving industry and regulatory standards. The RH CPAs Captive Insurance Group provides our clients with the necessary tools to achieve their financial goals and remain in compliance with the complex regulatory environment. We serve as your partner to help develop a sound and comprehensive business strategy, which may include one or several of the following services:

• Financial statement audits
• Insurance and reinsurance training and curriculum development
• Insurance tax compliance and planning
• Internal controls review and account reconciliation projects
• Procedural audits
• Regulatory compliance
• Reinsurance contract analysis and program review