Captive owners and practitioners face the challenge of designing a cost-efficient and silent-running global insurance programme incorporating a captive whilst complying with local territory insurance premium tax (IPT) requirements.
This is becoming even more important as local tax authorities are showing signs of enforcing strict compliance rules on foreign (i.e. captive) insurers to protect their local insurance industry.
The solution is for the insurance buyer and the captive to fully understand their respective responsibilities. Global programme premium should be apportioned to each territory on a justifiable (and auditable) basis.
Additionally insurance carriers should be required to provide clear documentary evidence of the management and settlement of foreign IPT. Programme structures should be re-examined to consider the role of non-admitted cover provided by the captive versus local underlying policies.
In the past, risk managers may have chosen to downplay IPT compliance, today tax authorities are forcing a re-think and it is vital that this issue is tackled to avoid unwelcome calls from tax authorities.
Guest blogger Malcolm Cutts-Watson