IRS Reprieve for Captive Insurers

A happy development for the domestic captive insurance industry today, with the news that the Internal Revenue Service (IRS) has dropped a proposed regulation that likely would have driven more business offshore. Issued September 28, 2007, the proposed IRS regulation would have eliminated the right of U.S.-sponsored captives to claim reserve deductions against their domestic tax for future claims and losses on consolidated, or related, business (see our November 14, 2007 posting). Apparently the IRS decided to withdraw the planned rule change after considering all the written comments received. The Coalition for Fairness to Captive Insurers has welcomed the move, saying it removes the uncertainty that has hung over the captive industry since the IRS regulation was proposed last fall. Check out National Underwriter’s February 20 online article by Caroline McDonald for more information on the decision. As many of you know, captive insurers are the oldest form of alternative risk transfer vehicle, dating back to the 1950s. Use of captives by corporations has grown exponentially during the last 30 years in the U.S. In 2006, the U.S. was the largest captive domicile – with 1,251 licensed captives – followed by Bermuda with 989. Check out further I.I.I. info on captive insurers.  

Leave a Reply

Your email address will not be published. Required fields are marked *