26 February 2018Accounting & tax analysis

831(b) captives and midsize market a significant growth area

Mid-size companies are continuing to see the benefit of captive insurance solutions, such as US captives that make the 831(b) election, despite negative stories labeling them as tax shelters or instances of poorly structured captives being taken to court.

This is according to Ellen Charnley, president of Marsh Captive Solutions, who told Captive International that cases such as Avrahami et al v Commissioner have not deterred mid-market companies from exploring these structures.

“We’ve had a number of conversations and perhaps more with potential captive owners than we would have had prior to the case,” she says.

“There is a lot of media coverage out there. If you were to type 831(b)s into the internet, it’s quite likely you will see a bit of negative press somewhere down the lines. So there’s an extra level of conversation taking place on the education side, around the fundamentals of what 831(b)s are trying to achieve.”

Charnley suggested the biggest mark opportunity for 831(b)s is for midsize firms - whether publicly or privately held - which are looking to enhance their risk management capabilities and take more control over their risk.

Not only does she expect growth within this area, Marsh expects the midsize sector being a primary growth area, regardless of whether a company files an 831(b) election or not.

“That is worldwide, not just in the US. We’re seeing midsize growth in Europe, perhaps with companies using a cell facility. We’re also getting a lot of interest from midsize companies in Asia and Latin America," she said.

Marsh recently formed a new protected cell company in Malta, aimed at providing small and mid-sized businesses with access to risk financing alternatives.

“This is not just a growth wave of the sector in the US; this is a midsize growth sector across the globe that we believe will continue."

This article is a snapshot of the cover feature of Captive International’s February issue, which can be accessed  here.