Micro-captive insurance companies play a useful role for relatively small businesses that need to insure risks they can't buy coverage for elsewhere. The businesses self-insure, setting up companies that are captive to their owners.

Because Congress allowed micro-captive owners a tax advantage, some companies have abused the structures in ways that induced the Internal Revenue Service to put them on its list for extra-close scrutiny. The IRS has won a few big cases against micro-captives, and hundreds more are docketed in the U.S. Tax Court.

The IRS has offered to settle with some of these companies in an effort to deal with the issue in a comprehensive way.

Host Amanda Iacone talked with Bloomberg Tax reporter Allyson Versprille about the nature of micro-captives and what the settlement offer might signal for the future of legitimate micro-captive structures.

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