“Today it’s hard to find a major company or university that doesn’t have one,” he said.

Now financial advisers are increasingly pitching captives to smaller businesses, including physicians’ groups, restaurant owners and companies that want to cut the costs of health insurance for their employees. They are being portrayed as a way not only to save money on insurance premiums but also to reduce income taxes and transfer money to heirs free of estate tax.

But the rush to set up captives could lead to problems for the business owners and for people filing claims against them.

INSURANCE PURPOSE From the point of view of the companies that set up these entities, captive insurance companies make perfect sense.

If a business paid a premium of $1 million to a regular insurer and had only $600,000 in claims, it would lose $400,000. If, however, it put the same amount of money into a captive, it would keep the extra $400,000 in the captive. This amount would then increase over the years.

Of course, that company could end up having $2 million in claims the first year. It would have to have a reinsurance policy to cover the claims, or pay them out of its reserves.

Mr. Adkisson said a captive could be seen like any other subsidiary. “A guy who owns a car lot can buy a carwash and wash his own cars,” he said.

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