State and local income taxes are an evolving issue that concerns captive insurers and that some states are challenging as they look for revenue.
Linking back to another video, "Tax-Deductibility of Captive Insurance Premiums," P. Bruce Wright of Eversheds Sutherland (US) LLP explains that for an insurance transaction to occur, risk transfer or risk shifting from one party to another and risk distribution are required. Several high-profile cases are also reviewed in this video.
Jeremy Colombik, president of Management Services International, says that what makes risk management profitable comes down to understanding that whether a business purchases insurance or not, the risk remains. Businesses can make their commercial insurance policies more efficient with a high deductible policy that moves risk into a captive insurer.
As also discussed in the video "History of US Employee Benefits in Captives" featuring Debbie Liebeskind of Towers Watson, the company must obtain a prohibited transaction exemption from the US Department of Labor.