Legal Developments

The 831(b) Institute discusses the implications of the Drake Plastics ruling on Internal Revenue Service (IRS) oversight of 831(b) captive insurance arrangements. The discussion addresses "transactions of interest," "listed transactions," legitimate risk management structures, and how the ruling could influence future IRS guidance, enforcement activity, and compliance considerations for captive insurance participants. Read More

A Texas federal court issued a split ruling on Internal Revenue Service (IRS) micro-captive regulations, striking down the listed transaction designation while upholding transaction-of-interest reporting rules. The decision maintains disclosure requirements for Section 831(b) captives, but it could limit enforcement and penalties tied to the stricter listed transaction classification. Read More

A Tennessee federal court upheld the Internal Revenue Service (IRS) final micro-captive reporting regulations, rejecting CIC Services' Administrative Procedure Act challenge. The ruling allows disclosure rules for certain Section 831(b) captive insurance transactions to remain in place, concluding the IRS acted within its authority to require reporting of arrangements that may present tax-avoidance risk. Read More

The North Carolina Business Court allowed bad faith and unfair trade practices claims to proceed against a captive insurer in a dispute over approximately $116 million in coverage tied to a litigation finance investment. The court dismissed the breach of contract claim without prejudice after finding the insured failed to meet policy conditions during the claims process. Read More

A Vermont-domiciled captive insurer has filed suit seeking reinsurance recoveries tied to abuse-related claims involving a former boarding school. The dispute centers on coverage treatment, batching of claims, and allocation of losses across policy years to trigger excess general liability and facultative reinsurance coverage. Read More