Captive Health Check

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:

  • Identifying structural and operational deficiencies in current captive insurance arrangements from a US federal and state tax perspective; and
  • Providing the captive owner with recommendations to strengthen the overall tax position of the captive, while at the same time considering the overall risk management and business goals of the company.

The Captive Health Check* allows us to gain insight into the structure and operations of the captive to inform the captive owner of “Best Practices” based upon our experience, including:
  • Expansion of the risk program to include alternative risks to be included in the captive;
  • Identify potential alternative investment and cash repatriation options;
  • Explore alternative methods of funding employee benefits related costs through the captive; and
  • Identify opportunities to reduce the company's overall tax burden.

To view the PwC Captive Lifecycle* click here:
Why is PwC the Right Choice?

PwC's extensive experience and in-depth knowledge of the insurance industry has allowed us to maintain the largest presence of the Big Four firms in the global insurance market. We currently audit more than 40 percent of the Global Top 50 insurance companies and serve more than 4,000 insurance companies and groups around the world. We provide tax, risk management, actuarial, assurance and business closure services to more than 500 captives globally. We believe that our multi-disciplined team approach distinguishes us in the captive insurance and alternative risk transfer arena. Our Captive Insurance Team comprises experienced tax and insurance professionals. We are uniquely qualified to address the issues facing your captive. We regularly assist our clients in all levels of both federal and state tax controversy issues concerning their captive insurance companies.