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.
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.".
What is a captive manager?
Captive manager. In the US, most captive managers are small administrative services providers. They don’t draft insurance policies, which is generally the function of a senior insurance or corporate lawyer; they don’t price policies, which is done by a property and casualty insurance underwriter; and they don’t purport to be responsible