4 February 2019Accounting & tax analysis

CICA publishes risk pool guidance following Avrahami and Reserve Mechanical

The Captive Insurance Companies Association (CICA) has published new guidance to provide guidance on the use of risk pools following prolific US Tax Court cases involving.

CICA's guidance document, ' Commercial Insurance and Captive Insurance Industry: Commonly Accepted Practices', provides a review of the structure and use of risk pools, addresses some of the common misperceptions, and provides guidance on commonly accepted insurance practices.

“CICA has always been a leader in championing the use of best practices for operating captive insurance companies, and we’re pleased to expand our best practice resources with this new guidance document,” said Dan Towle, president of CICA.

Towle continued: “Risk pools are an important element in both commercial and captive insurance, but unfortunately their use is often misunderstood. As a result, recent high-profile cases such as Avrahami v. Commissioner and Reserve Mechanical v. Commissioner paint activities like risk pooling with a negative brush that spills into the commercial and captive insurance industries. We feel it’s important for a domicile-neutral organisation like CICA to help explain the commonly accepted practices for creating and operating a risk pool.”

The guidance document was worked on by CICA's Small Captives Task Force along with other association members.

Members of the Task Force include: Robert "Skip" Myers, Morris, Manning & Martin; Michael Bemi, retiree, The National Catholic Risk Retention Group; Jeremy Huish, Artex Risk Solutions; Dan Kusaila, Crowe Horwath; Michael Serricchio, Marsh Captive Solutions; and Dana Sheridan, Active Captive Management.