Merriam & Associates offers experienced advice and counsel regarding the benefits and risks associated with reinsurance transactions – both domestic and international.

At Merriam & Associates, our attorneys are well-versed in the complex laws surrounding reinsurance. Clients turn to us for advice and counsel on the benefits and drawbacks of specific reinsurance transactions. Our attorneys thoroughly evaluate our clients' current and proposed reinsurance arrangements to ensure that the transaction does not violate any U.S. tax law, which would result in a denial of tax benefits.

Our attorneys have in-depth knowledge of U.S. tax laws, foreign tax treaties and the tax laws in countries such as the Turks & Caicos, Bermuda and the Cayman Islands. We know which reinsurance transactions are likely to raise red flags and put our clients in danger of an Internal Revenue Service (IRS) audit.

We make sure our clients fully understand the risks they are taking, as well as the possible benefits from each specific reinsurance arrangement. If a transaction is aggressive, we want our clients to enter the contract in a smart and knowledgeable manner. If a client's proposed arrangement is more conservative, our lawyers make sure clients understand the benefits and drawbacks of the transaction.

Our attorneys also thoroughly investigate promoters' reinsurance plans and craft tax opinions explaining the benefits and risks associated with the arrangement.

Reinsurance is insurance for insurance companies.  For a variety of reasons, including reducing surplus drain or to attract additional customers, many insurance companies seek insurance from a reinsurer. In addition to mitigating loss, businesses get a tax deduction for reinsurance premiums paid. 

Smaller reinsurance companies often find it expensive to form in the U.S due to high capital requirements and excessive regulatory costs. Even though these companies are formed offshore, they often elect to be treated as U.S. insurance companies under I.R.C. section 953(d) for tax purposes. By doing so, the reinsurance company avoids excessive regulatory costs, but is still able to utilize the beneficial insurance tax provisions of the code. 

While at the IRS Counsel’s office, Terri developed a specialty in producer owned reinsurance companies, often referred to as PORCs, advising agents across the nation about the issues. The expertise began with Wright v. Commissioner, T.C. Memo. 1993-328, aff'd 73 F.3d 372 (9th Cir. 1995), the case that set the precedence concerning acceptable practices in the PORC industry. After Wright, Terri continued to advise and litigate producer insurance issues including Hinshaw's Inc. v. Commissioner, T.C. Memo. 1994-327, this concerned the timing when gross income from the sale of vehicle service contracts had to be taken into income and amortization of insurance payments.

To navigate the complex provisions of the tax code, call our reinsurance attorneys at 206-829-2500.

Insurance Tax Benefits