Tax-Deductibility of Captive Insurance Premiums

February 17, 2016

As discussed in the video "Why Is Tax-Deductibility of Premiums to a Captive Important?" by P. Bruce Wright of Sutherland Asbill & Brennan LLP, captive insurance companies would prefer their premium to be tax-deductible. This video explains that in order for any insurance premium to be tax-deductible, the insurance contract must have all of the attributes of an insurance policy, and the subject of the policy must be insurable for tax purposes. To qualify as insurance, (1) risk transfer (risk shifting) must be present (i.e., an actual economic transfer of the burden of risk must take place) and (2) risk distribution must take place (i.e., the insurer must have sufficient independent risk and premium from unrelated parties pooled to cover loss payments).


Subscribe to the Captive Wire daily newsletter and get this FREE 21-page report: Risk Distribution—Expected Adverse Deviation (EAD) Case Studies. Explore the concept of risk distribution through the lens of EAD and its application in captive insurance. Authored by leading actuaries, this report delves into the methodology behind EAD, offering case studies that examine how EAD modeling can demonstrate sufficient risk distribution in various captive insurance structures.


February 17, 2016