Filed Under:Risk Management, Captives

831(b) Captives: ‘Small’ Option Is Increasingly Big Idea for Midsize Cos.

Tax, other advantages are driving growth of this alternative- risk-transfer vehicle, but abuses could trigger IRS crackdown

The Section 831(b) or “small” P&C captive is becoming a big idea for midsize companies looking for cost-effective ways to transfer risk.

Captive experts say an 831(b) offers midsize companies an introduction to alternative risk transfer and its benefits, providing this class of insurance buyers a valuable cost-saving tool long utilized by Fortune 1000 companies.

DOMINANT DOMICILES

The most popular U.S. domiciles for 831(b)-eligible captives are Utah, Delaware and Vermont, where more than 500 such facilities are domiciled.

ABUSE BY THE WEALTHY RISKS IRS SCRUTINY; WILL IT SPOIL 831(B) USE FOR EVERYBODY?

While state regulators generally welcome the increasing captive business in their jurisdictions being driven by growing interest in the 831(b) option, Kinion, Ross and Provost all say they proceed with caution when prospective captive owners approach them with plans of setting up small captives.

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