Why all 831(b) Micro-Captives Need a Strategic Review


Feasibility studies are common in the captive industry as part of the formation process. “Refeasibility study” is a newly coined term meaning taking a fresh look to see if you would make the same decisions now. Frankly “refeasibility” is a silly term. Well managed captives following best practices do a “refeasibility” study at least annually anyway, as part of the “renewal” procedure we recommend and feel should be part of all base management fees. Annual renewals, done correctly, almost invariably lead to business plan changes resulting in modifications to lines of cover and policy rating.


Strategic reviews go beyond feasibility, refeasibility or annual renewal procedure studies. For one they should be conducted by a fresh pair of eyes. And they should have a scope beyond an actuarial peer review.

Strategic reviews should look at all existing documentation, including processes and procedures, financial condition, reports (financial, regulatory and tax), contractual relationships, everything available relating to the captive since inception, and identifies all weaknesses and areas needing improvement. A strategic review’s main objective is to identify any potential problem areas that might arise during a regulatory or tax examination of the captive.

The reason strategic reviews are not common is captive managers guard their processes and procedures and documentation very closely. They do so out of competitive spirit as well as insecurity.

Owners of captives should be the one making a decision to hire someone to do a voluntary strategic review, and demand the manager cooperate and provide all needed documentation if not already in the owner’s possession (as it should be via shared secure dedicated server or a cloud storage service facility).


The slowest time of year for most captive managers seems to be the June through August time period. This would be a good time to conduct a strategic review. This would also seem allow sufficient time to address any findings of concern by year end.


Every strategic review engagement is uniquely customized. The exact scope should be articulated in the engagement agreement.

We have done general “clean up” testing strategic reviews for captive managers which merely involved reviewing client databases to see if core documentation connected to formations was properly stored and easily retrieved in client files. Deficiencies are not uncommon from the early years as a manager since many managers in their early years lacked staff depth and expertise compared to today. Earlier year client project files are often not documented to the same degree of quality and scope as more recent captive project may be. This type of strategic review helps bring older client captive documentation standards up to current practice standards if possible. Many management firms have grown fast and are busy; full time internal staff often simply lack time, or expertise, to do this type of special project work.

We recommend every strategic review initiated by an owner (verses by the management firm to get a second and outside opinion on the quality of their program and staff work product) consider having part of its scope be development of a RFQ (Request For Quote) component if the owner is considering either changing managers (possibly creating a new captive and winding down an old one no longer deemed adequate for any of many reasons that may surface during a strategic review) or looking for engagement renewal negotiation strength.

For information on best practice standards today in the micro-captive industry, read this article.

For more information visit www.UScaptive.com and www.CaptiveExperts.com