Document Type

Working Paper

Publication Date

8-27-2015

SSRN Discipline

Legal Scholarship Network; PSN Subject Matter eJournals; Banking & Financial Institutions eJournals; Political Economy - Comparative eJournals; FEN Subject Matter eJournals; Law & Society eJournals; Law & Society: Public Law eJournals; LSN Subject Matter eJournals; Tax Law & Policy eJournals; Financial Economics Network; Political Science Network

Abstract

This article examines the § 831b captive insurance industry from the perspective of its impact on the economy as a whole The author argues that it is beneficial to firms in two very broad ways 1 it increases the operational efficiencies of firms utilizing § 831b captives and 2 it alters the incentive structures of firms utilizing § 831b captives so as to incentivize prudent decision making It is then argued that these benefits bleed into the macro economy and have a beneficial impact on both growth and stability There are partially offsetting costs associated with the industry such as lost tax revenue but in the authors opinion these costs are significantly outweighed by the benefits As a result policymakers should adjust their adversarial stance toward the industry and adopt policy measures that incentivize beneficial captive formation while narrowly curbing abuses in the industry The article ends by presenting examples of such policy measures

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