How Does Your Captive Insurance Company Stand Up?
While the Internal Revenue Service (“IRS”) has accepted the use and role of captive insurance arrangements as an integral part of a comprehensive risk management strategy, they continue to challenge captive insurance arrangements which fail to comply with the principles and guidelines established by the courts in defining “insurance” for US federal income tax purposes. In response, PricewaterhouseCoopers has developed a comprehensive Captive Health Check* to assist companies in assessing how their captive insurance arrangements stand up against these principles and guidelines and to serve as a platform for identifying best practices and possible enhancements to improve the captive's financial benefits.
Why a Captive Health Check*?
Recently, substantial changes have occurred in the tax landscape dealing with captive insurance companies. The Internal Revenue Service abandoned its long standing ruling position that captive insurance arrangements could not be “insurance” for US federal income tax purposes. The Service has indicated that it will continue to pursue captive insurance arrangements on a facts and circumstances basis. The Service has also issued a series of Revenue Rulings setting out what it believes are the requisite fact patterns for a valid captive insurance arrangement. The Captive Health Check* provides the captive owner with an experienced overview of the structural and functional aspects of their captive insurance company and is designed to provide the captive owner with a range of benefits, including: