Against a backdrop of legal battles
and regulatory changes, small
captives have been through a lot.
But how much has the landscape
changed, and are 831(b)s still an
attractive option for the middle
market? US Captive investigates.
Captives that make the 831(b) election—also known as
microcaptives or enterprise risk captives (ERCs)—have long
been a cost-effective method for smaller and medium-sized
companies to get involved in alternative risk financing.
The sector has gone through a series of changes over the last
few years, for example the Protecting Americans from Tax Hikes
Act of 2015 (PATH Act) increased the maximum annual premium
limitation for 831(b)s from $1.2 million to $2.2 million (effective
January 1, 2017) with a provision for inflation adjustments in future
years ($2.2 million to $2.3 million for the 2018 tax year).
Further amendments have been made to this act in 2018 with the
Consolidated Appropriations Act.
Although the 831(b) election for insurance companies has existed
since 1986, microcaptives have come under increased scrutiny
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