6 April 2017Analysis

Trump Administration should amend captive regulation, claims CI survey

The Trump Administration needs to bring greater clarity to regulations surrounding microcaptives, according to responses to an exclusive survey carried out by Captive International.

The survey asked readers the following question: “As they become increasingly popular, what should microcaptives call for from the Trump Administration in terms of regulation?”

A wide range of comments came back, with many referring to the Protecting Americans from Tax Hikes (PATH) Act of 2015 in January, and the Internal Revenue Service (IRS) Notice 2016-66, both of which were controversial.

Brent Suhr, captive specialist at Artex Risk, called for: “Clarification on the ownership between husband in wife to comply with the PATH Act. The Act did not give clear guidance on the subject and many people are fearful. This could lead to a reduction of captive and less business. Also, guidance on 80% risk pools. Are they allowed and what amount of claims is acceptable?”

Raymond G. Ankner, president of RMC Reinsurance said that he would require the IRS to publish guidelines that managers and owners can rely upon.

And Rick Bennett, special advisor at Greencone Investments, said: “Eliminate [IRS] Notice 2016-66 classifying micro captives as transactions of interest. Allow Congress to pass laws not the IRS through process.”

Other readers, who left anonymous comments, were very critical the new reporting requirements introduced in IRS Notice 2016-66, which identify certain captive insurance transactions where certain persons involved with the transaction must disclose their involvement to the IRS.

One reader said: “Roll back [the] position taken by some in [the] IRS that all microcaptives are abusive, roll back Notice 16-66.” Another called for guidance, claiming that there is no fact pattern for deductions disallowed vs ones that are accepted.

“These need to be more closely regulated in terms of determining what qualifies as legitimate business insurance risk,” said another anonymous reader. “Appropriate, actuarially certified, (via an accredited actuary), rates for the risk need to be charged.”

And finally one reader was very clear about what they wanted to see from the Trump Administration in terms of microcaptive regulations: “Remove all regulations.”

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