A captive insurance company is owned and controlled by the business it insures, allowing the parent to deduct premium payments as ordinary business expenses while underwriting profits accumulate inside the captive on a tax-advantaged basis. Under Section 831(b), small captives pay tax only on investment income — not premiums — up to a statutory threshold of $2.85M for 2025. But captive insurance is a risk management tool first and a tax tool second: structures built in reverse draw IRS scrutiny and lose in court. This episode covers what genuine compliance looks like, how recent Tax Court decisions and 2025 IRS regulations define the line between legitimate and abusive structures, and what documentation and actuarial standards are non-negotiable.