October 2013

By Sean Gregory King, JD, CPA, MAcc

Recently, Beckett Cantley and a few other commentators have attacked the idea of captive insurance companies investing into life insurance.  Cantley’s recently managed to get his opinions on this topic published in a law review article here.

As I believe both the conclusion and the premises of Cantley’s article to be flawed, and I have expressed that view in various forums, I have been invited by Cantley , Hale Stewart, and others to respond with a “scholarly” article of my own refuting Cantley’s position.

However, as I do have a day job, I don’t have the luxury of a professorship that pays me to create marketing pieces for my side business under the pretext of a law review article, and I don’t have access to cadre of law students to assist in my research and writing efforts, I’m afraid that the below is the best that I can do, less than strictly “scholarly” though it may be.  Even so, for the critical reader, one not susceptible to falling for irrational “arguments from authority”, the below should suffice to demonstrate that:  (a) I know what I’m talking about, and (2) the Cantley paper is wrong in its conclusion and biased in its approach.

It seems that every time I drive on the interstate, I pass billboards for attorneys who will “get me the money I deserve” or “turn my wreck into a check.”  This article will not discuss the merits or demerits of our current legal system.  But, the fact remains that we live in a very litigious society and successful business owners and professionals provide a particularly promising lawsuit target.

One of the surest methods to protect assets from lawsuits and other creditors

In addition to gaining the ability to self-insure and to own a profitable second business, a captive insurance company can also serve as a remarkably efficient vehicle to house a deferred compensation plan for key employees and business owners.  The logic behind this approach is quite simple.  Rather than giving ownership or deferred compensation to key employees in the parent company, businesses can offer deferred compensation and ownership through a separate company – their own insurance company.