News & Events

March 2017 Construction News Brief

Captive Insurance

Three Recent Developments to Watch
In recent years, captive insurance companies have been attracting more and more attention in the construction industry. A number of companies have expressed interest in both the risk management advantages and potential tax benefits of forming a captive.

If you are considering forming a captive insurance company, or if your contracting firm already operates one, some recent developments could have a major impact on your decision.

What is a Captive Insurance Company?
A captive insurance company is a legally licensed, limited-purpose property and casualty insurance company formed to insure the risks of its owners. Contractors can form captives to provide coverage against a variety of risks including professional liability, errors and omissions, general and umbrella liability, and workers’ compensation reimbursement.
March 2017 Construction News BriefMany contractors use a captive to insure against risks their commercial policies exclude, or to add coverage above their commercial policies’ maximum limits. As a legitimate insurance company, the captive can directly access major reinsurance underwriters to cover these risks, without paying a commercial carrier’s commission.

Another common strategy is to purchase high-deductible, low-cost coverage from a commercial insurer and then use a captive insurance company to provide so-called “first dollar” coverage for losses below the deductible.

Tax Considerations
In addition to risk management considerations, there are also some potential tax benefits that lead some companies to consider forming a captive. If a captive is properly structured and meets all the necessary risk-shifting and risk-distribution standards to qualify as a legitimate insurance company, the premiums it collects could be exempt from federal income tax. Instead, it would be taxed solely on its investment income. [Read Full Article]


New OSHA Electronic Reporting Requirement

A new workplace injury reporting rule from the Occupational Safety and Health Administration (OSHA) will directly affect a number of contractors. The new rule requires many employers to electronically submit information about workplace injuries and illnesses to an OSHA-operated website — and the deadline for the first submission is only a few months away.

Under the new rule, businesses with 20 or more employees in certain industries, including construction, must submit information from their OSHA Form 300A (Summary of Work-Related Injuries and Illnesses) to a designated OSHA website. The deadline for submitting the 2016 summary is July 1, 2017. Beginning in 2019, the submission deadline will move forward to March 2.

In addition, starting in 2018, all businesses with 250 or more employees will also be required to submit information from their OSHA Form 300 (Log of Work-Related Injuries and Illnesses) and individual injury and illness incident report forms (Form 301). [Read Full Article]