What are the benefits of a captive insurance company?
The insured in a captive insurance company not only has ownership in and control of the company but also benefits from its profitability. A policyholder in a mutual insurance company is theoretically entitled to receive dividends if the company makes a profit.
What are the different types of captive insurance?
The first category is known as non-sponsored in which the company is the creator and beneficiary. Within that category the most common are single-parent or “pure”, group and association. The second category is sponsored in which the captive is owned and controlled by another company that allows other companies to “rent” insurance.
Does a captive insurance company get a tax break?
If the parent company realizes a tax break from the creation of a captive insurance company will depend on the classification of insurance, the company transacts. In the United States, the Internal Revenue Service (IRS) requires risk distribution and risk shifting to be present for a transaction to fall into the category of "insurance.".