Although the last 18 months have seen intense industry discussions, “831(b)” or “micro-captives” have been around for decades. Risk management-motivated companies use these small insurers to efficiently insure various risk exposures that exhibit reasonably high claim severities, yet are incurred unpredictably. Most of these risks are either within the company’s retentions, self-insured or assumed because commercial coverage is lacking or unreasonably expensive. However, as with many tax-advantaged situations, captive insurers formed under Tax Code §831(b) haven’t always had risk management as their primary goals. The wealth and estate planners have created lucrative tax avoidance models that cast a huge spotlight on these special purpose insurers. Since 2003, the Internal Revenue Service has cast itself as Inspector Javert to any Jean Valjean who forms and operates a captive under the small insurer election under §831(b).