For example Company A is a high street retailer of high value new technology consumer goods. At the point of sale, A offers insurance policies to third party customers which provide accidental damage and theft cover for a 3-year period. The policies are insured by Company B, an insurer which is part of the same MNE group as A. A receives a commission with substantially all of the profit on the insurance contract going to B. A full factual and functional analysis shows that the insurance contracts are very profitable and that there is an active market for insurance and reinsurance of the type of risks covered by the policies. Benchmarking studies show that the commission paid to A is in line with independent agents selling similar cover as a standalone product. The profit B earns is above the level of insurers providing similar cover.
Chapter X paragraph 10.225
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 »