Insurance coverage is an integral part of the construction process. The contract documents rely on insurance to facilitate the risk allocation and risk transfer needs of the project. These contractual specifications lay out the types of coverage, policy limits, and...
An important case for contractors and subcontractors has surfaced at the Michigan Supreme Court. Skanska USA Building, Inc. v. M.A.P. Mechanical Contractors, Inc. raises the question: is property damage coverage under a standard commercial general liability policy...
On January 1, 2019, the limitation on premium revenue under IRC 831(b) increased from $2.2 million to approximately $2.3 million. This occurred by operation of 26 U.S.C. 831(E), which provides that the $2.2 million limit shall be increased annually by a cost-of-living adjustment rounded up to the next lowest multiple of $50,000.
By Mark Rysberg, Esq. and Daniel Hatch, Esq. Attorneys Mark A. Rysberg and Daniel J. Hatch of Hilger Hammond recently authored a comprehensive article in CFMA Building Profits magazine regarding captive insurance programs and how they can improve a contractor’s bottom...
Attorneys Mark Rysberg, Dan Hatch and Chris Nyenhuis will present “Captive Insurance Strategies to Decrease Risk and Increase the Bottom Line,” at the CFMA Midwest Regional Conference, Monday, September 24, 2018, in Lombard, Illinois. Registration information can be...
By: Mark A. Rysberg Captive insurance within the building construction industry is well established. Such programs are generally developed to reduce insurance premium costs and to approach risk management from a strategic perspective. Captive insurance programs can...
By: Mark A. Rysberg A controlled insurance program (CIP) can be implemented on a construction project to provide project-specific coverage that is directed at managing the risks transferred to third-party insurers. There are generally two forms of CIPs; those...
By: Mark A. Rysberg The short answer is: no. From the perspective of some people, the reduction in the corporate tax rate from the rate that existed in 2017 to the rates that will be applied in 2018 eliminates the incentives for captive insurance participants to elect...
On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was signed into law. Proponents and sponsors of captive insurance structures often refer to the tax benefits of I.R.C. Section 831(b), which allows eligible insurance companies to make an election to be taxed only the company’s taxable investment income.
In effect, the 831(b) election allows such insurance companies to collect a set amount of insurance premium without having to pay tax on said premiums. Effective January 1, 2017, insurance companies electing taxation under 831(b) can collect up to $2.2 million in insurance premiums while being taxed only on the taxable income generated from the collection and retention of such premiums.
Captive insurance entities can be structured in a variety of ways depending on the participant’s needs, goals, and funding abilities. The following are some of the more common structures that can be used.
Pure Captive
In this model, a captive insurance company is typically a wholly-owned subsidiary of a parent company. These captives are usually closely controlled by the parent company and are generally used by companies that have insurance and risk management needs that are significant enough to justify the financial costs of being solely responsible for the captive’s operational costs. Companies that consider forming a pure captive generally do so to improve risk management and to maximize the benefits of I.R.C. 831(b) election thereby sheltering up to $2.2 million in taxes.