Micro Captive Insurance Company Coverage and Policies

ALTERNATIVE RISK TRANSFER STRATEGIES
Traditional risk transfer techniques involve purchasing conventional, guaranteed-cost insurance policies. Although this provides successful 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, Chernoff Diamond 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 designed to expand, complement, and close gaps in existing insurance programs.

EXAMPLES OF MICRO CAPTIVE COVERAGE:

  • Everything a Business Currently Self-Insures:
    • Deductibles
    • Losses more than 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 Events:
    • Weather, terrorism, etc.
  • 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
  • Reimbursement:
    • 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 at 411Risk@ChernoffDiamond.com to learn more about the lower costs, broader coverage and greater control that can be yours with Micro Captive Insurance.