Rent-a-Captive – Under these programs, the policyholder is insured by the Captive without owning, or at least, without voting control of the Captive.  The Captive facility “rents” its capital, surplus, and license to the policyholder and usually provides administrative services, reinsurance, and/or an admitted fronting company.


Retrospective Rating Plan – One in which the final premium is based on the insured’s actual loss experience during the policy term, subject to a minimum and maximum premium, with the final premium determined by a formula.


Risk Retention Group – Any corporation or other limited liability association whose activities do not include the provision of insurance other than reinsurance with respect to the similar or related liability exposure of any other risk retention group which is engaged in business or activities.


Self-Insurance – The planned assumption of risk.


Protected Cell, Leased Capital Facility or Sponsored Captive (PCC) – These captives are created by a legal entity that is not an insured of the sponsoring captive.  A PCC captive is not created by its insured’s.


The insured’s of a PCC captive have no ownership interest in or control of the PCC captive.  The insured’s whose risks are underwritten by the captive are called the participants.  Sponsored captives are referred to as “rent-a-captives“ in some domiciles.  PCC captives may be required to pay an access fee but do not require insured’s to pay in capital in return for ownership of the captive.


Tax Reform Act of 1984 – Included two sections that increased the tax bill of an offshore captive insurer defined as a controlled foreign corporation.  One section redefined income related to the insurance of US-based risks as US-source income instead of foreign-source income.  Another section made income from the insurance of related risks in foreign countries taxable in the current year.  The net effect of these two changes was to eliminate most tax advantages for an offshore single parent captive.


Tax Reform Act of 1988 – The major change imposed by this act affected offshore group captives in that the definition of a U.S. shareholder was changed from an ownership interest of 10 percent or more to any shareholding interest.

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