The IRS's view of captive insurance risk and well-established actuarial science now diverge significantly. The IRS's fundamental ignorance of the nature of fortuitous risk is the cause of this disparity. The IRS' arbitrary 65% loss ratio, which micro captive insurance businesses must reach to qualify as a safe harbor, serves as a reminder of this. This makes no sense from an actuarial perspective.
The IRS's view of captive insurance risk and well-established actuarial science now diverge significantly. The IRS's fundamental ignorance of the nature of fortuitous risk is the cause of this disparity. The IRS' arbitrary 65% loss ratio, which micro captive insurance businesses must reach to qualify as a safe harbor, serves as a reminder of this. This makes no sense from an actuarial perspective.