When should investment risk in captive insurance be minimized?
Investment risk should be minimized when the risk from business operations is high due to the start-up nature of the captive, the volatility and nature of the risks being insured, and the captive's capital position.
What is “captive insurance?
The term “captive insurance” is intended to refer to an insurance undertaking or entity substantially all of whose insurance business is to provide insurance policies for risks of entities of the MNE group to which it belongs.
Can captive insurance be managed from within the MNE group?
If the captive insurance is managed from within the MNE group it is necessary to determine which entity manages it and to appropriately reward that management. In order to consider the transfer pricing implications of a transaction with a captive insurer, the initial question will be whether the transaction under consideration is one of insurance.