Segregated Cell Captive Taxation

Rent-a-captives have been around for many years, and provide a captive insurance alternative with little or no upfront investment.  Segregated or protected cell captive insurance companies (see here & here) are a newer and simpler structure for rent-a-captives which have been created through enabling legislation in a number of off-shore and on-shore captive domiciles.

While the tax treatment of insurance premiums paid to rent-a-captive arrangements is not always clear, the IRS issued Revenue Ruling 1008-08 to provide some guidance.  Two articles (see here & here) discuss the guidance and some of the nuances and challenges for rent-a-captive owners.  Basically:

The ruling holds that if a rent-a-captive cell satisfies the tax definitional requirements of an insurance company, it will be treated as a standalone insurance company despite the cell’s lack separate legal status.

However, most captive insurance company arrangements are not simple or straightforward.  An additional discussion of captive tax issues can be found here.

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Comments

[Bendz]

Hi,

Useful information.
Varies types of insurances are needed for us.
:-)