The captive insurance industry faces a number of unique challenges in 2021, one of which has been to do with the assessment, budgeting and financing of losses, says SIGMA’s Lori Ussery.
When starting a captive insurance company in a foreign jurisdiction such as the Cayman Islands or Bermuda, many prospective captive owners may be excited about the potential tax benefits. However, these tax benefits should never be a primary reason to form a captive, says Daniel Greaves of Grant Thornton.
There is a considerable amount of confusion about loss development factors and how they work. Enoch Starnes and Michelle Bradley of SIGMA Actuarial Consulting demystify loss development and explain why this knowledge is crucial for employees and board members of captives.
To state the obvious, 2020 has been like no other year. However, the captive insurance world has not only survived, it has thrived under a myriad of strange circumstances, says Gary Osborne of Risk Partners.
A GAO report was intended to shed some light the use of captives as abusive tax shelters. Instead it only risks perpetuating misunderstandings, says Bradley’s Davis Smith.
There is very little consistency between countries when it comes to insurance tax reporting, and captives managers need to stay across the nuances to avoid trouble. Daniela Dinkova of Sovos explores some of the differences.
IFRS 17 is the first international accounting standard for insurers. It represents a huge change for captive insurance companies, which will need to be well prepared to comply with the new rules, says Alex Gedge of Marsh.
An increasing number of captives have been looking at writing business interruption coverage for their owners. They should tread carefully, as doing so without following the correct procedures could have adverse tax implications, says Davis Smith of Bradley.
The captive industry has been cowed by the IRS for years, with the tax collector securing a string of legal victories that left businesses wondering whether having a captive was worth the effort. However, the COVID-19 pandemic has shattered the logic on which those cases were won, and will lead to a resurgence among 831(b)s, predicts Matthew Queen.
Owners of 831(b) tax-elected captives, and their advisors, have watched with alarm as the 30-year old 831(b) tax election has come under mounting scrutiny. These concerns flared up again with the recent circulation of intimidating letters from the IRS. Owners of 831(b)s have a decision to make about whether they persist with their current arrangements, says Captive Alternative’s Emilie Gastley.