Where an insurance contract is not sold directly from insurer to insured, recompense will usually be due to the party who arranges the original sale. In certain circumstances a higher rate of profit might be earned on the third party sale than would otherwise be expected from comparison with similar transactions. Where the sales agent and insurer or reinsurer are associated, any comparability analysis as part of the process of determining the arm’s length level of reward for the parties would need to consider the circumstances that give rise to the high level of profit. Competition would usually work to limit the amount of profit which can be earned on a transaction both on the part of the sales agent and on that of the insurer or reinsurer. The availability of alternative providers may also influence the ability of each party to negotiate a higher level of profit as part of the overall transaction.
Chapter X paragraph 10.224
Category: Chapter X: Financial Transactions, E. Captive insurance, E.3. Determining the arm’s length price of captive insurance and reinsurance, OECD Transfer Pricing Guidelines (2017) | Tag: Agency sales, Captive insurance, Financial transactions, Pricing captive insurance« Prev | Next »