Despite parts of the captive industry being maligned by the Internal Revenue Service (IRS), Ryan Work, vice president of government relations for the Self-Insurance Institute of America (SIIA), argued that captives are now playing a critical role to help businesses survive the COVID-19 pandemic.
Many of the risks being faced during the COVID-19 outbreak, in general, are high severity, low frequency issues.
Work explained that addressing the hard commercial market the industry currently faces and finding coverage for related businesses risk, in light of COVID-19 will be difficult to find in the commercial market for some time.
He said: “As captive insurance comes into play in many of these situations, the important role it plays during these times of high severity risk is, and will continue to be, abundantly clear.”
Work said that while the US started to institute ‘stay at home orders’ and require the closure of non-essential businesses, captive owners across the country received approximately 150,000 ill-timed letters from the IRS, sent out based on 2018 disclosures.
Given the current pandemic, combined with the timing and burden being placed on these businesses by the IRS, SIIA and its members have asked that the IRS cease this “wrongly-timed and unnecessary demand and allow these businesses operating captive insurance to mitigate the risks that Congress and the tax code allows them to appropriately undertake”, Work explained.
A more detailed article regarding this subject will be available in issue 195, which will be out 01 April.