Owen Faulkner, Editor
US Captive is published
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US Captive – ISSN 1751-0678
wanderluster / iStock Photo
Innovation is not without its challenges
So far in 2018 the US captive insurance
industry has been anything but quiet, as it
contends with various regulatory changes,
high-profile court battles in the small
captives sector, and new structures that
dispel the myth that captives are used only
for traditional property/casualty risks.
It’s hard not to focus on what’s going on
in Washington and how President Donald
Trump’s “America first” rhetoric and sweeping
legislative changes are impacting captives.
January’s US tax reforms represent the first
major overhaul to federal taxes since 1986,
with provisions that US and international
captives must both be wary of. Some say the
cut in the US corporate tax rate, along with
imposition of the Base Erosion Anti-Abuse
Tax (BEAT), could reduce the longstanding
tax advantages of offshore domiciles.
Months after the dust from Avrahami has
settled, scrutiny from the IRS continues
as it gains additional notches on its belt in
the US Tax Court. Reserve Mechanical v
Commissioner is the latest win which may
unfortunately end up further harming the
reputation of the legitimate wing of the small
captives industry. But it is not all doom and
gloom, and the 831(b) sector continues to
grow, offering an attractive entry point into
captive insurance for the middle market.
In his foreword, Dan Towle, now one
year into his role as the president of CICA,
reflects on how the captive market has
changed in the past year, and talks about the
importance of continuing to fuel innovation
in captive insurance. He explains how CICA
is planning to play a larger role in advocacy
for the captives industry, and in representing
captives beyond the US.
Captives continue to be used in increasingly
innovative ways. The industry is wising up to
what captives are capable of, and we can see
that in new structures and in emerging and
One such example is the cannabis industry.
Due the nature of the sector and its unique
insurance needs, a very enthusiastic captive
insurance industry is stepping in to provide
solutions where the commercial market falls
short. Similarly, cyber generates a lot of buzz,
as captives can offer more complex, tailored
Against a backdrop of rising healthcare
costs, medical stop loss is one of the fastest
growing sectors within captives, and many
corporates are continuing to look at either
taking on this risk in their captives or joining
existing group structures.
The introduction of agency captive legislation
in states such as Vermont and more recently
Connecticut illustrates a push by the insurance
industry to get closer to their insureds. Agents
and brokers are becoming more sophisticated,
which will come as no surprise amid concerns
that they may lose business or be replaced as
We hope you enjoy this issue.
A publication by:
www.captiveinternational.com US Captive 2018 3