1. Skeptical Sprockets Corp. has decided that creating a captive to hold some of their more difficult to insure risks is their best option. However, they are concerned about regulators ruling that their structure is invalid (disallowing the tax benefits) and they are relying on the tax benefits to make the decision cost efficient. 
2. 
   
3. What is your recommended organizational structure. They have no desire to take on additional risk by insuring 3rd parties.