Regulation and Oversight
Micro-captives are not included in this year's Internal Revenue Service (IRS) "Dirty Dozen" list of "tax scams," though an IRS statement suggests the agency will continue monitoring the small captive insurance companies. It is the first time in 5 years that the IRS did not include micro-captives on its annual list.
Captive insurance companies may serve as valuable tools for many organizations addressing pandemic-related risks in the wake of COVID-19, but regulators will closely scrutinize captives' pandemic coverage plans. Policy language, triggering events, coverage details, and reinsurance will be key considerations.
The National Association of Insurance Commissioners (NAIC) has released its first update on the state insurance regulatory response to COVID-19, noting the pandemic's impact on the NAIC's 2020 regulatory and operational priorities. The report says that state insurance regulators and the NAIC have been closely monitoring insurers' financial health.
Experiences shared by a panel of captive insurance regulators suggest that while some things might have been done differently, captive regulation largely continued in a business-as-usual fashion during the COVID-19 pandemic. The regulators spoke in a webinar sponsored by the International Center for Captive Insurance Education.
Guernsey's financial services sector is emerging from its COVID-19 lockdown. The island, a leading domicile for captive insurance, alternative investment funds, and private wealth, went into lockdown on March 24 to help control the spread of the disease. There are currently no known active COVID-19 cases in the island.