off (transfer) risks that they do not wish to accept: this may include product liability, general and professional liability and directors' and officers' liability. Vehicle insurance, both property damage and third party liability of corporate fleets and vehicles, is also quite commonly covered. Regulation Captives may be licensed to write some lines of business directly. In other cases, such as workers' compensation in the US, for example, the business must initially be written by another insurer, under its insurance licence, which then reinsures it (lays it off) to the captive. The original insurer retains a fee, usually somewhere between 5% and 15%, to provide this service. Premiums paid to captives are tax deductible, provided the terms of the policy (including the premium amount) are reasonable. A captive cannot arbitrarily set the premium amount simply to generate a deduction for the parent. In most situations, the captive carrier should be able to demonstrate its premium generating process (underwriting). In the European Union, a new set of regulatory requirements (Solvency II) is planned with additional restrictions and responsibilities for captives and reinsurance companies. Some European captives ask for simplified regulation. Captive manager Reiss created the first captive management company, International Risk Management Limited (IRML), in Bermuda in 1962 to provide the administration of his client's captives (this is now part of the Aon Corporation). Most captive management is usually outsourced to a captive manager located in the jurisdiction that holds the primary license for the captive. In the US, most captive managers are small administrative services providers. They don’t draft insurance policies, which is generally the function of a senior insurance or corporate lawyer; they don’t price policies, which is done by a property and casualty insurance underwriter; and they don’t purport to be responsible for state or federal tax issues, which is what a tax lawyer does. Other captive management firms provide a full turnkey service to include all aspects of forming and managing a captive insurer on an ongoing basis, which would include professionals that understand the insurance, tax, and legal aspects of a captive. The middle market is the area of growth for captive managers because more than 90% of Fortune 500 companies already do captives, according to Capstone Associated Services Ltd., a comprehensive manager of small captive insurers with over 140 captives formed for the middle market in the last 15+ years. Captive insurance companies are creatures of