As more and more U.S. domiciles open their doors to captive insurance companies, the industry continues to grow. Competition among domiciles has driven down the cost for small and mid-size business owners to own their own insurance company. As such, it is not surprising that more and more small and mid-size business owners are choosing to experience the benefits of improved risk management and a vastly improved financial strategy.
Unfortunately, small business captives are often misunderstood and maligned by captive managers, attorneys and actuaries who have built their careers and made their fortunes serving large corporate captives. Their approach often does not match the needs of small businesses, and they are being left out of the lion’s share of the growth in the industry. Rather than changing their business model and approach to serve the needs of small and mid-size businesses, many choose to attack small captives instead. These attacks are often characterized by broad, nebulous generalities, lies and misinformation, in the worst case. In the best case, their arguments betray arrogance and contempt for small business owners and they unique challenges they face.
U.S. law, plainly written and plainly understood, is clearly on the side of small captives. In 1986, Congress created and has since maintained small captive law and the 831(b) tax election. The 831(b) tax election is often the focus of critics of small captives. Their attacks are similar to attacking motorists who turn right on red. In most states (unless otherwise posted), turning right on red is legal and encouraged (even expected). Are there “right-on-red abusers” who don’t come to a complete stop or cut off other motorists? Of course there are. Is it legal to turn right on red? Yes. Does the law serve a good purpose? Yes. Should critics attack motorists who turn right on red? You decide.
CIC Services, LLC has been a champion of small and mid-size businesses since our inception in 2005. So, we were quite please when Captive Review reached out to our Principal and In-House Counsel, Sean King, JD, CPA, MAcc to provide an opposing view to the attacks by the “old guard.”
Captive Review posed the following question:
Should the captive industry be concerned about the proliferation of entities making the 831(b) tax election?
Donald Riggin, ART of Captives Consulting argues “Yes.”
Sean King, JD, CPA, MACC of CIC Services, LLC argues “No.”
To read both view in Captive Review, CLICK HERE. Captive Review content is accessible by membership only. They allow a 2 week free trial membership.