Menu
Tax Notes logo

Bermuda Insurers Warn of Unintended Consequences of Reinsurance Regs

JUL. 23, 2015

Bermuda Insurers Warn of Unintended Consequences of Reinsurance Regs

DATED JUL. 23, 2015
DOCUMENT ATTRIBUTES

 

July 23rd, 2015

 

 

Internal Revenue Service

 

Room J5203

 

P.O. Box 7604

 

Ben Franklin Station

 

Washington, DC 20044

 

Re: RIN 1545-BM69 -- Exception from Passive Income for Certain Foreign Insurance Companies

 

We are writing in respect of the above mentioned matter published in the US Federal Register on April 24, 2015 in response to the request for comments. The Bermuda Insurance Management Association was established in 1977 and is an association of professional insurance managers and other captive service providers in Bermuda. It exists to promote the interests of its members and their clients; to liaise with government and/or any association or body on matters affecting the insurance industry; to provide a unified approach to problems and opportunities that may be of concern to the Association's members and to encourage professionalism of the members in carrying out their business.

Bermuda remains the largest captive domicile in the world and the majority of our captive clients originate from the United States. These clients represent a wide range of industry groups and a significant number of the largest US Corporations. Alternative risk transfer and the captive solution is a vital part of the overall risk management planning for progressive companies and allows for long term business planning.

Our membership, clients and the various tax experts we have consulted are concerned that the proposals in their current form reach beyond the hedge fund structures identified (on which we make no comment) and into the well-established captive arena. The effect of the unintended consequence of the proposed regulations as currently drafted would have a devastating effect on the risk management planning of our clients.

By their very nature captives are efficient and flexible structures and are typically owned and formed by organizations that are not operating in the insurance/reinsurance sectors. In order to operate in a cost efficient manner with the appropriate levels of technical expertise, outsourcing of financial and administrative functions is a normal operating procedure which appears to conflict with the "active conduct" definition in the proposed regulations. Equally, in order to be flexible and apply appropriate risk management solutions in a timely manner, the capital structures of captives will vary and the application of the "insurance business" definition is likely to prevent timely risk mitigation.

We believe that the proposed regulations will have significant consequences beyond the hedge fund reinsurance operations identified and will significantly affect the risk management, planning and mitigation practices utilized by a significant number of US Corporations through their captive structures.

In conclusion, we respectfully request that the IRS hold a public hearing to ensure that our concerns are discussed fully and that the proposed regulations be reconsidered fully to ensure that the captive industry is not over-burdened or penalized by legislation intended for a specific alternative sector of the reinsurance industry,

Sincerely,

 

 

Robert T. Paton

 

President

 

The Bermuda Insurance Management

 

Association

 

Hamilton HM HX, Bermuda
DOCUMENT ATTRIBUTES
Copy RID