Counsel for companies that decide to carry their own risk. We structure, domicile, and license the captive, then build the governance and solvency program it runs on.
A captive is an insurance company a business builds to carry its own risk, and the test it must pass is whether what it writes is insurance. Courts and the IRS ask whether risk is shifted and spread, whether it is insurance risk rather than business risk, and whether the arrangement looks like insurance as the market understands it. A subsidiary that merely pre-funds its parent's expected losses fails the spreading test, and with it the premium deduction.
Distribution is a numbers question. Published rulings treat a captive as sufficiently spread when at least half its premium comes from unrelated insureds, or when it covers a dozen affiliates none of which carries more than about 15 percent of the risk. Smaller programs try to reach the same place through pooling arrangements, which the IRS reads closely, or a cell in a sponsored facility.
The domicile sets the capital, the filings and the supervisor the captive answers to for life. We choose it with the program in hand rather than the brochure, coordinate with locally admitted counsel there, and stay on as the entity's company counsel once it is licensed.
Testing a captive against the program and, if it fits, choosing among single-parent, group, association, cell, and rental structures based on whose risk is written, how capital is shared, and the lines to be covered.
Weighing captive regimes against the program on capital and solvency requirements, cell legislation, lines permitted, and supervisory approach, then coordinating with locally admitted counsel in the chosen domicile.
Standing up the carrier, from incorporation through the business plan, capital, and licensing application, and shepherding it through the domicile's supervisor to admission so the captive can begin to write.
Protected-cell and segregated-portfolio structures, including the core, the cell agreements, and the participation terms that keep assets and liabilities ring-fenced cell by cell.
Structuring and documenting the captive so the arrangement reflects genuine risk transfer and risk distribution, coordinated with tax counsel where regulatory standing and tax treatment turn on the analysis.
The program a captive runs after formation, covering the board and service providers, capital and solvency margins, annual filings and business-plan changes, dividends, and supervisory approvals.
Once licensed, the captive files an annual statement with its supervisor, usually with audited financials and an actuarial opinion on its loss reserves, and sits for a financial examination every three to five years. Many domiciles require at least one board meeting a year there, and the manager, auditor and actuary need the supervisor's approval.
A captive licensed in one state is a non-admitted insurer everywhere else, so compulsory lines like workers' compensation need an admitted carrier to front the policy and reinsure it to the captive against collateral, usually a letter of credit. The insured's home state may levy a self-procurement tax on premium paid to its own captive.
Under regulations finalized in 2025, a section 831(b) captive whose loss ratio over up to ten years is below 30 percent, and which has lent money back to its owners, is a listed transaction; below 60 percent, it is a transaction of interest. Both require disclosure by the captive, its owners and its advisers.
In a protected-cell company the sponsor holds the license and the core capital, and each participant's assets and liabilities are walled off by statute from the others. A cell can open in weeks rather than months, but the participant signs onto the sponsor's governance, and the core's exposure to a failing cell varies by domicile.
Capital contributed at licensing is not freely withdrawn. Captive statutes commonly require prior approval of any dividend or distribution, and a material change to the business plan, such as a new line or a new insured, must be approved before it is written. Write first and file later, and the supervisor has an easy finding.
A captive taxed only on investment income under section 831(b) must keep its premium inside the indexed annual ceiling and pass a diversification test: no single policyholder may supply more than 20 percent of net written premium, or the captive's ownership must track the insured's. The election cannot be revoked without the IRS's consent.
Before anything is formed, the program is tested against the actuarial study and the risk-distribution analysis: the lines the captive will write, a premium that reflects genuine transfer, and a single-parent, group, or cell structure that fits how capital will be shared. Some captives should not exist, and this is where we say so.
The domicile is chosen for its regime: capital and solvency requirements, cell legislation, lines permitted, and supervisory temperament. The business plan, pro formas, and capitalization are then written to that supervisor's standard, with locally admitted counsel engaged in the chosen jurisdiction.
The application goes in with the incorporation, the initial capital committed, the manager, actuary, and auditor named, and the plan defended before the domicile's insurance supervisor. Admission is the moment the entity becomes a carrier and may lawfully write its first policy year.
The captive now runs as a regulated insurer for life: annual statements and actuarial opinions, board governance, solvency margins tested on every dividend, and supervisory approval sought before the business plan changes. One partner carries that program forward year over year.
You are becoming the insurer rather than buying a policy, and we build companies for a living.
A captive is an insurance company a business forms to write its own risk, or the risk of a defined group. It is a licensed, regulated carrier with its own capital and governance, used to retain risk a company understands well, access reinsurance directly, and tie the cost of cover to its own loss experience.
Single-parent (pure) captives, group and association captives, cell and segregated-portfolio structures, and rental captives. The right structure depends on whose risk is being written, how capital is shared, and the domicile. We work through those choices and document the entity, the cell agreements, and the participation terms that fit the program.
The domicile sets the licensing, capital, and reporting a captive lives under, so the choice is a structural one. We weigh the supervisor's captive regime, capital and solvency requirements, available cell legislation, and the lines to be written, and we coordinate with locally admitted counsel in the chosen domicile to license and stand the captive up.
Yes, if it is to be treated as insurance for tax and regulatory purposes. Risk shifting fails where the parent guarantees the captive's obligations, where premium is calibrated to be refunded, or where the captive lends most of its surplus straight back to its owners. Risk distribution fails where one insured dominates the book and no unrelated or pooled risk dilutes it. The arrangement must also behave like insurance: an actuarial basis for the premium, policies issued before the loss, claims actually adjusted and sometimes denied. The captive is built to pass those tests on its own facts, and we coordinate with tax counsel where the analysis is in issue.
A captive is a regulated carrier, so it runs an ongoing program: minimum capital and solvency margins, an annual business plan and regulatory filings, a board and service providers, and supervisory approval for material changes and dividends. We help build the governance and compliance framework at formation and advise on the filings, changes, and capital questions that arise as the captive operates.
Partner-first. One partner is your point of contact across the structure, the domicile and licensing path, and the governance program, and that partner brings in the firm's corporate, regulatory, and tax bench, and locally admitted counsel in the domicile, when the matter reaches into them.
Coverage, bad-faith, and reinsurance recovery disputes, from policy interpretation and the duty to defend to the contested claim resolved in negotiation, arbitration, or court.
Explore →Counsel for technology-driven insurance ventures on distribution, program structures, regulatory licensing, and the data and product questions that sit alongside them.
Explore →The full practice, taking in insurer formation and licensing, reinsurance, ILS and cat bonds, run-off and portfolio transfers, regulatory and solvency, and insurance M&A.
Explore →Reviewed by Jonathan D. Herpy, Sr., Senior Partner · Last updated October 2026 · Educational overview · Not legal advice
One partner is accountable for the whole matter, and you have that partner's direct line. Chicago, London, and Dubai work to the same standard.