Wider captive industry warned of complacency over 831(b) attacks

• 65% loss ratio limit highlighted as particularly problematic for wider captive and commercial market
• IRS has previous in attacking larger captives and could return post-831(b)
• Expanded IRS insurance teams focused on micro-captives will need to be redirected in future
• Captive industry encouraged to submit comments in response to proposed regulations

While Internal Revenue Service proposed regulations are focused on those taking the 831(b) tax election, some have warned the wider industry to be on red alert should the IRS broaden its scrutiny to larger captives.

The proposals, published on 10 April, have polarised opinion across America’s captive landscape, with some arguing the IRS is out to “destroy” the micro-captive industry, while others have branded it a “refreshing change”.