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Appeals court affirms IRS summons for Delaware micro-captive info

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The Delaware Department of Insurance (DDOI) has lost its latest attempt to block an Internal Revenue Service summons concerning 831(b) captives managed by Artex Risk Solutions and Tribeca Strategic Advisors, wholly owned by Artex, in the State.

The United States Court of Appeals for the Third Circuit on 21 April affirmed the District Court’s decision that the McCarran-Ferguson Act does not protect the documents requested and the threshold for constituting the ‘business of insurance’ was not met.

The IRS originally issued its summons to the DDOI on 30 October, 2017 during its investigation into Artex and Tribeca, seeking filings and communications between the Department and the captive managers.



The Department declined to cooperate with ‘Request 1’ of the summons, citing Section 6920 of the Delaware Code “which generally prohibits the Department from disclosing certain information about captive insurance companies to anyone, including the federal government, absent the companies’ consent”.

‘Request 1’ was seeking “all electronic mail between [the Department] and Artex and/or Tribeca related to the Captive Insurance Program”.

The request concerned around 200 certificates of authority granted by the DDOI to micro-captives managed by Artex and Tribeca. The IRS initially believe there to be 191 certificates, but the DDOI has represented that it had actually issued 225 certificates.

In its 21 April ruling, the Court disagreed with the Department’s argument that requested information would impact its “business of insurance”.

“For that argument to hold water, however, we must accept that affirming the District Court would lead to a change in behavior by captive insurers (or their managers) that would reduce the reliability of captive insurers,” the Court stated.

“That is a contention that cannot survive scrutiny. As an initial matter, the substantive requirements for licensure and continued permission to operate under certificates of authority issued by the Department is not altered by our affirmance of the District Court’s ruling.

“The Department has the authority to obtain documents it requires for licensure and subsequent examinations and can impose consequences on companies that 38 will not provide them.

“Simply put, the Department will be no less entitled to the information it currently receives to license captive insurance companies than it has previously been. The same is true of the Department’s entitlement to information to determine whether already-licensed captive insurance companies should be allowed to continue to operate.”

Captive Intelligence published on 21 April a Long Read with extensive reaction and analysis of the IRS’ new proposed regulations for captives making the 831(b) tax election.

Will 831(b) proposals destroy the industry or be a refreshing change?


  • Opinion split on whether latest IRS intervention is a positive development, or “out to destroy the industry”
  • Service buoyed by four for four Tax Court victories over micro-captives
  • Up to 90% of captives taking 831(b) tax election could fall into new IRS definitions
  • Managers and services providers expected to review risk appetite of continuing 831(b) work

The Internal Revenue Service’s proposed regulations for 831(b) have divided opinion across America’s captive landscape, with some saying they could destroy the industry, while others have branded it a refreshing change.

Captive Intelligence reported last week the IRS had published proposals which, if implemented, would identify certain micro-captives as “listed transactions” and others “transactions of interest”.

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Captive Intelligence provides high-value information, industry analysis, exclusive interviews and business intelligence tools to professionals in the captive insurance market.

Guardrisk Life cell underwrites YuLife’s South African expansion

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YuLife, an employee benefits and life insurance provider, will utilise Guardrisk’s cell captive to roll out its products in South Africa.

Guardrisk is the leading cell company specialists in South Africa with vehicles in Mauritius, Gibraltar and South Africa itself, writing corporate P&C risk, life, affinity and tailored risk solutions.

YuLife, which was founded in London in 2016, is now expanding to South Africa with its group risk protection (life, income protection, lump sum disability and funeral cover).

“We are excited to be working together with YuLife to bring cost-effective insurance solutions to customers in South Africa,” said Herman Schoeman, CEO of Guardrisk Life.

“As a company rooted in innovation, partnering with such a forward-thinking company like YuLife that shares our commitment to meeting customers’ needs makes good business sense.

“We look forward to developing our relationship with YuLife and providing our solutions to its customers while also empowering them to have a more thorough and holistic relationship with their life insurance and protection provider.”

YuLife has also recently expanded into the United States, and now covers more than 600k group policyholders across small to large businesses, with over $50bn of coverage in place.

YuLife says it has seen more than five times growth in premiums year-on-year, and in July 2022 raised a $120M Series C led by Dai-ichi Life with participation from T. Rowe Price, bringing the company’s total funding to $206M.

NRRA announces fundraising plans to combat Florida bill

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The National Risk Retention Association (NRRA) has announced three stages of fundraising to combat Florida Senate Bill 516, which if passed into law, would require an AM Best “A” rating and a minimum financial size of $100mn in capital surplus in order for an RRG to write commercial auto liability in the state.

Phase one of funding plans include the current campaign to communicate with and educate legislators as to the “inherent flaws in the bill”.

NRRA said it had already written four letters in opposition to the Bill to the involved committees, the Senate President and House Speaker.

The Association has also partnered with Paul Handerhan, president of the Federal Association for Insurance Reform (FAIR), who has joined forces with Lewie Pugh, executive vice president and legislative spokesman for the Owner-Operator Independent Drivers Association (OOIDA), and Linda Allen, a small independent Florida trucker.

“While our interest and those of the proponents are actually not inconsistent, their language will be self-defeating, while ours will not be,” Joe Deems, NRRA executive director said.

“The purpose will be to persuade an amendment to the Bill that will work.”

Deems has previously said that the Bill unlawfully seeks to regulate RRGs, and unlawfully discriminates against those that do not obtain such ratings.

He believes the Bill could impact 96% of the RRGs registered in Florida.

“If Florida can get away with violating the federal law by making any financial rating a requirement to do business in their state, it may set a precedent to make other states bolder to do the same thing,” Deems added.

“We need to stop this bill before it passes because, if it passes, suing the state will take years and will be too late to help these impacted RRGs.”

Phase two will be dependent on the amendments actually adopted and includes an ongoing campaign to develop favourable agreements with multiple state agencies who require liability insurance from RRGs, such as the Department of Highway Safety and Motor Vehicles.

Deems said the estimated cost of this will be in the range of $75,000 to $90,000.

On 10 April, the House Commerce and Senate Appropriations Committee voted unanimously to approve the Bill.

While the Bill did pass the Senate Appropriations Committee hearing on 12April, the vote was not unanimous, and it prompted greater discussion and a desire to know more about its potential wider impact.

If the Bill passes with the current language, NRRA said its third phase of the campaign would be to commence litigation to and challenge it at the federal level, with an estimated cost of $150,000.

Captive knowledge gives brokers “competitive edge”

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Educating brokers about the role and value of captives will provide more opportunities for business, according to Olga Collins, CEO of the Worldwide Broker Network (WBN), and John Harris, group business development director at Robus Group.

Collins and Harris featured on GCP #83, discussing the profile of WBN and its members and the increasing interaction they are having with captives in recent years.



With much of the captive management and consulting space dominated by the large, multinational brokers such as Aon, Marsh and WTW, there has long been a perception challenge among some smaller, independent brokers that promoting or proposing captives can lead them to ultimately lose out on the business.

WBN is the largest independent broker network in the world with more than 150 broker members in over 100 countries.

“[Our members] work with clients spanning from very large brands all the way to high-net-worth private individuals, and I agree that it’s a matter of education,” Collins said.

Collins added that a wider profile of client is becoming interested in the consulting services provided by brokers, in addition to transactional risk management.

Harris, group business development director at Robus Group which is a partner of WBN, said that generally some of the more traditional brokers can initially feel threatened by captives from an income perspective, as they feel they could lose out when a client enters a captive structure.

“But that typically is because they’re not necessarily as educated or have a full understanding of how a captive can play a part in a programme,” he said.

“When you start to help them realise that this is actually something that gives them a competitive edge, they start to look at things slightly differently.”

Harris noted that Robus spends time informing brokers on how a captive strategy can be used as a competitive advantage.

“One, to help them protect themselves against attacks on their existing book,” he added.

“Where they’ve got some significant clients and they’re not deploying captive strategies or even thinking or talking about it with their clients to enable them to stop the competition, the Marsh’s and the Aon and the big guys from attacking their business.

“But also to enable them to use captive strategies as a leverage when they’re attacking new prospective business as well.”

He noted that when brokers realise that this is actually something that gives them a competitive edge, “they start to look at things slightly differently”.

International programme pain points still top of the agenda – Jayesh Patel

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Ensuring the smooth running of an international programme remains a key priority for captive owners, despite new lines and bespoke policies becoming increasingly important, according to Jayesh Patel, global head of market practice management for multinational at Allianz Global Corporate & Specialty (AGCS).

Speaking in an extensive interview on GCP #83, Patel discussed the new role he took on last year, AGCS’ renewed focus on and organisation concerning captives and what he is hearing from the market.

While AGCS has been involved in some new, innovative captive structures over the past 18 months, including supporting Meta’s captive being deployed alongside a Side A ‘Laser DIC’ D&O policy, Patel said compliance and operational efficiency remains a big focus.

“What I’ve heard from captive owners with multinational programmes, their big bug bear is just making it run smoothly,” he said.

“And it links to what we said before about bringing local policies together, making sure premium payment is paid on time, ensuring that all of the pieces in the chain work well.

“A lot of people are saying, you know, apart from the cool complex topics, please just make my programme run smoothly.”

As captive owners continue to grapple with the hard market, there has been an increasing demand for 100% fronting programmes and more bespoke wordings in policies written by captives.

While previously some commercial carriers were reluctant to engage in pure fronting, the landscape has changed with customer demand forcing a different approach.

This can lead to the (re)insurer playing multiple roles with the captive.

“It’s important first of all to understand what the needs are of the customer at different elements of that captive chain,” Patel explained.

“We’ve got fronting, which is all about making sure you’ve got the right partner in place locally, your right partner in place centrally to cede premium through as quickly as possible.

“What else can we do for that customer within the tower structure? Is the captive retention set correctly? Can we manage those retentions is a better way?

“And then on the aggregate side and on the layers above, is that structure the most effective way as well when we’re talking about cross cost solutions?”

Listen to the full interview with Jayesh Patel in GCP #83 here, or on any podcast app. Just search for the ‘Global Captive Podcast’.

Over reliance on commercial market prompts GEODIS US captive formation

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An over reliance on the commercial insurance market led to the Americas region of GEODIS to establish its own single parent captive, according to Justin Bahorik, director of insurance & risk management.

GEODIS is a world leader in transport and logistics with expertise in all aspects of the supply chain. Globally, GEODIS is headquartered in Paris, France with the Americas Region based out of Brentwood, Tennessee.

In April 2022, GEODIS launched its first single parent captive domiciled in Tennessee and is being managed by Aon.

Bahorik explained the motivation and plans for the captive in GCP #83.

 “When you’re fully reliant on commercial markets, you have to pay what they tell you you’re going to pay with no other options,” he said.

He gave the example that their workers’ compensation premiums had continued to rise despite always outperforming the industry and losses never breaching the retention.

Bahorik explained: “We weren’t being fully rewarded for our hard work in safety and innovation and with a captive, our rates are determined using our own experience and not the industry as a whole.”

Bahorik said it’s been a very positive first year of operation and the company is looking to expand the captive in the near future.

“We definitely want to expand,” he added. “So far we’ve taken a crawl, walk, run approach to ensure we are building a strong base and all stakeholders are comfortable with the process.”

He highlighted that the captive first began by writing a deductible reimbursement policy for workers’ compensation and auto, but has recently added a truck broker liability policy that is written specifically to address the unique needs that GEODIS has in this area.

“Not only can you reduce dependence on the commercial markets, but you can also write policies that benefit the policyholder which in this case is GEODIS,” Bahorik said.

“We were able to include language that filled a gap that we were not able to find commercially.

“The benefit of a captive is not realized in the short term. This is a long term investment. 

“We want to position our captive for success by carefully adding coverages that provide value to the business while also protecting and building the captive’s balance sheet.

“Our hope is that in 5 or 10 years we will have a sizeable surplus that we can utilize to provide even greater stability to the business.”

Listen to the full interview with Justin Bahorik in GCP #83, which also features interviews with Jayesh Patel, Global Head of Market Practice Management for Multinational at Allianz Global Corporate & Specialty (AGCS), and Olga Collins, CEO of the Worldwide Broker Network, and John Harris, Group Business Development Director at Robus Group.

GCP #83: Jayesh Patel, the GEODIS captive and WBN’s Olga Collins

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Olga Collins, Worldwide Broker Network
John Harris, Robus Group
Jayesh Patel, AGCS
Justin Bahorik, GEODIS

In episode 83 of the Global Captive Podcast, supported by the EY Global Captive Network, Richard is joined by a four guests. Time stamps below:

Start – 13.50: Jayesh Patel, Global Head of Market Practice Management for Multinational at Allianz Global Corporate & Specialty (AGCS), and Richard discuss the commercial insurer’s restructuring and focus of captive business globally.

13.50 – 26.22: Recorded at the CICA International Conference in March, Senior Reporter Luke Harrison interviews Justin Bahorik, Director of Insurance and Risk Management at Geodis in the US, about the Tennessee captive formed by the transport and logistics company last year.

26.24 – End: Richard is joined by Olga Collins, CEO of the Worldwide Broker Network, and John Harris, Group Business Development Director at Robus Group, to discuss the growing importance and value of captives to WBN members.

For the latest global captive news, analysis and though leadership, visit Captive Intelligence.

Ascot US appoints Mark Totolos to lead new captive solutions unit

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Ascot has appointed Mark Totolos to a newly created role of senior vice president for captive solutions at Ascot US.

The appointment marks the (re)insurance underwriting group’s entrance into America’s booming captive market.

Totolos, who joins from Skyward Specialty Insurance where he was head of captives and programmes, will be a part of the portfolio solutions group, reporting into Tony Lyons, head of portfolio solutions.

Matt Kramer, CEO at Ascot US, said: “With Mark’s deep experience and extensive knowledge in the captive marketplace, I am confident that we will be well-positioned to capitalise on strategic captive opportunities, expanding our portfolio to best serve our clients both now and in the future.”

Totolos will be responsible for setting and communicating the vision, value proposition, and long-term business strategy for Ascot’s new captive solutions portfolio.

“As companies continue to seek alternative risk transfer with increasing frequency, Ascot is committed to responding to the dynamic market by offering clients new capabilities that meet their evolving needs,” Totolos said.

“In this role, I look forward to developing Ascot’s captive business to both drive growth and profitability, and to provide creative solutions to address our clients’ risk management challenges.”

Totolos has previously worked for AIX Group, a subsidiary of Hanover Insurance Group, and Harleysville Insurance Company in underwriting and captive roles.

IRS obsoletes Notice 2016-66, proposes new “micro-captive” regulations

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The United States Treasury and Internal Revenue Service (IRS) have obsoleted Notice 2016-66 and confirmed they will not enforce the disclosure requirements or penalties that are dependent upon the procedural validity of the Notice.

In March 2022, the District Court of Eastern Tennessee struck down the IRS’ controversial Notice 2016-66. The Court also held that the IRS acted arbitrarily and capriciously based on the administrative record.

The Service has now issued proposed regulations identifying certain micro-captive transactions as “listed transactions” and certain other micro-captive transactions as “transactions of interest”.

The full proposed rules have been published on the Federal Register here.

“The IRS previously identified certain micro-captive transactions as transactions of interest in Notice 2016-66,” the Service stated on 10 April.

“Recent court decisions in the Sixth Circuit and the U.S. Tax Court ruled that the IRS lacks authority to identify listed transactions and transactions of interest by notices, such as Notice 2016-66, and must instead identify such transactions by following the notice and public comment procedures that apply to regulations.

“Treasury and the IRS disagree with these decisions that the IRS lacks authority to identify listed transactions by notice and continue to defend listing notices in litigation except in the Sixth Circuit.

“Treasury and the IRS will, however, no longer take the position that transactions of interest can be identified without complying with notice and public comment procedures. Treasury and the IRS issued the proposed regulations to ensure that these decisions do not disrupt the IRS’ ongoing efforts to combat abusive tax shelters throughout the nation.”

Micro-captives, as labelled by the IRS, are captive insurance companies that take the 831(b) tax election and have long been under scrutiny from the Service.

To qualify for the election, annual premium must now be below $2.65m. By taking the election the insurer is only taxed on investment income and not underwriting profit.

The Treasury Department and IRS intend to finalise the regulations, after reviewing public comments, this year and issue proposed regulations “identifying additional listed transactions in the near future”.

“The obsoletion of the notice, however, has no effect on the merits of the tax benefits claimed from the transactions themselves and related litigation, or income tax examinations and promoter investigations relating to micro-captive transactions,” the IRS states in its notice of proposed rulemaking.