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Captive Insurance Risk Pooling Explained

Bruce Wright
June 20, 2018

A new Captive Thought Leader Video featuring Bruce Wright, partner of Eversheds Sutherland (US) LLP, titled "Captive Risk Pooling Explained" has recently been added to the Captive.com video library.

According to Mr. Wright, risk pools in captives allow organizations to spread risk and provide for a tax benefit. Risk pools provide unrelated risk to a captive insurer so that the parent corporation can take a deduction for premium paid to the captive by reporting on the insurance method of accounting. The elements of insurance (for federal income tax purposes) are risk transfer, risk distribution, and common elements of insurance. The focus of risk pooling has to do with risk distribution.

A pool is an arrangement in which organizations share risk. A sound pool should have (1) similar risks, (2) a common underwriting methodology, (3) a pool manager, and (4) the potential for loss or gain and (5) is set up on an annual basis. There are different types of structures for pools, such as a reinsurance treaty, pooling entity, or fronting company

There is no cost to view the videos, and you will find them in the Captive Thought Leader Videos section of Captive.com. More videos will be added in the future.

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