What is a captive insurance company?
What is 'Captive Insurance Company'. A captive insurance company may form if the parent company cannot find an outside firm to insure them against particular business risks; if the premiums paid to the captive insurer creates tax savings; or if the insurance provided is more affordable or offers better coverage for the parent company's risks.
Who are the major participants in a captive insurance program?
Here’s an overview of the major participants in a captive insurance program: Insured: Works with its insurance broker to find a captive that fits the company’s needs. Broker: A trusted advisor that supports the insured on a regular basis.
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.".