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With careful planning, policyholders can reduce or defer the taxes they pay on insurance recoveries while maximizing their tax deductions for damage payments. Taxes also play an important role in designing novel, alternative insurance arrangements.
We have helped a number of policyholders structure insurance settlements to minimize the risk of insurer insolvency while simultaneously minimizing their exposure to taxes imposed on recoveries they receive. Similarly, we have helped companies maximize or accelerate deductions for damages they pay.
We also have provided extensive advice designing and implementing cost- and tax-effective alternatives to conventional insurance arrangements. Frequently, these alternatives combine elements of self-insurance and risk shifting, while permitting tax deductions for premiums paid. Examples of these alternative arrangements include the use of captive insurance companies, retrospectively rated insurance, loss portfolio transfers, and finite risk insurance.
Representative Matters
- Assisted a number of large, US-based corporations in negotiating structures that had the effect of deferring tax on carrier commutation settlement payments.
- Assisted a foreign-based multinational corporation in structuring a tax-efficient reinsurance arrangement with its offshore captive in connection with a settlement of insurance claims against its third-party insurer.
- Assisted members of a high risk industry in the establishment of an offshore captive to provide coverage at favorable rates and in a tax-efficient manner.
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