Articles & E-Books


Captive Check-Up

Mar 22, 2016

Business situations and structures change daily, but often captive insurance companies are left to run their course once setup. Coverages are often on “auto-renew” status, changes in a domicile's view of captives are ignored, regulations change without your knowledge and sometimes what you think is happening with your captive isn’t. 

Additionally, on December 18, 2015, President Obama signed the PATH Act, which will increase the premium limitation on captives electing treatment under Section 831(b) as well as create a new diversification requirement to limit a captive’s ability to be used as a wealth transfer vehicle. 

Further, recent activity indicates that that the IRS is interested in captives that are not correctly structured or may be perceived as setup purely for tax avoidance.  

Wipfli can conduct a strategic review of your captive called a Captive Check-Up to ensure all of your bases are covered.  This comprehensive assessment will help ensure:

  • Compliance with current Domicile regulatory requirements
    • Business Plan is on file with Domicile and Captive is in compliance with Business Plan
    • Annual Reporting Requirements are being met
    • Investment Portfolio (including loans and life insurance) are within acceptable parameters
    • Collateral/Capitalization method and amount remain appropriate
    • Policies issued reflect risk being retained by captive
  • Compliance with IRS Requirements to ensure proper tax treatment
    • Elements of Insurance, Risk Transfer, Risk Shifting and Risk Distribution are being met, with specific emphasis on Third Party Risk
    • Ownership structure will be compliant with PATH Act Diversification requirement
    • Review of current "hot-topics"
  • Current coverage remains appropriate and within risk-tolerance of owners 
  • Maximization of premium limitations
    • New revenue opportunities are reviewed
    • Additional risk management opportunities are being explored
  • Services providers: 
    • Are performing in accordance with their agreements and charging an amount within industry norms. 
    • Have appropriate policies and procedures in place to ensure the safe and effective operation of your captive 

After a thorough review of your captive, Wipfli will provide you with a detailed analysis of our findings and may further provide a list of suggested improvements, an implementation plan for those suggestions and provide benchmarks for future review against the performance of the captive.  Wipfli’s team dedicated to the captive insurance niche is ready to help you maximize you with this captive check-up. Please contact Mark MartinelliSam McDonald, or your Wipfli relationship executive for assistance.