Service attacks experience-rated reinsurance agreements
Article Abstract:
The Internal Revenue Service (IRS) found that two experience-rated reinsurance contracts could not be recognized because they avoided taxes. The unnamed reinsurer gained tax benefits disproportionate to the risk assumed. The IRS found that the reinsurer did not pay its share of losses in the first contract and had terminated the second contract prematurely prior to the acquisition of the company. The reinsurer should not have qualified as a life insurer for tax purposes as it had stated. The IRS denied the ceding commissions which the reinsurer deducted.
Publication Name: Best's Review Property-Casualty Insurance Edition
Subject: Insurance
ISSN: 0005-9714
Year: 1993
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Deficiency reserve not allowed for nonlife SPDAs
Article Abstract:
The Internal Revenue Service (IRS) has decreed that only life insurance reserves for single-premium deposit administration contracts can have deficiency reserves. A deficiency results when an insurer charges a premium that is less than the net valuation for that class of policy and is negated by establishing a reserve to compensate for the amount. The permitted reserve is now equal to the interest compiled at the guaranteed rate up to the valuation date.
Publication Name: Best's Review Life-Health Insurance Edition
Subject: Insurance
ISSN: 0275-0988
Year: 1992
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