Tax-Deductibility of Captive Insurance Premiums


Captive Tax Issues | P. Bruce Wright | Partner | Eversheds Sutherland (US) LLP 


As discussed in the video "Why Is Tax-Deductibility of Captive Premiums Important?," P. Bruce Wright of Eversheds Sutherland (US) LLP explains that captive insurance companies prefer that their premiums are tax-deductible. Mr. Wright 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).