TPG2022 Chapter X paragraph 10.195

Category: E. Captive insurance, TPG2022 Chapter X: Transfer pricing aspects of financial transactions | Tag: , , , , , ,
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The principles of accurate delineation of the actual transactions and allocation of risk detailed in Chapter I of these Guidelines apply to captive insurance and reinsurance in the same manner that they apply to any other intra-group transactions. However, this section addresses mainly captive insurance (as well as captive reinsurance – fronting). In particular, it should be borne in mind that:

  • the carrying on of risk mitigation functions falls within the wider concept of risk management but not within that of control of risk (see paragraphs 1.61 and 1.65);
  • there is a difference between the specific risk being insured (the party taking the decision to insure – i.e. mitigate – or not, controls this risk; that party will usually be the insured but may be another entity within the MNE group) and the risk taken on by the insurer in providing insurance to the insured party.





Related Guidelines

  1. TPG2022 Chapter X paragraph 10.197The insurer is carrying out a risk mitigation function in respect of the insured party’s risk but not actually assuming that risk. It is assuming the risk of insuring (i.e. mitigating) the insured party’s risk. That risk will be controlled by either the...
  2. TPG2022 Chapter X paragraph 10.198Captive insurances may be self-managed from within the MNE group, or managed by an unrelated service provider (often a division of a large insurance broker). Typically this management would include ensuring compliance with local law, issuing policy documents, collecting premiums, paying claims, preparing...
  3. TPG2022 Chapter X paragraph 10.196Although the quantum of the risk reward for the insured party and the insurer might be dependent upon exactly the same events in both cases, that quantum could be significantly different (for example, if the insured risk materialises and a claim is made,...
  4. TPG2022 Chapter X paragraph 10.201Insurance requires the assumption of insurance risk by the insurer. In the event of a claim, the insured does not suffer the financial impact of a potential economic loss to the extent that insurance risk has been assumed by the insurer, because the...
  5. TPG2022 Chapter VI paragraph 6.63The extent and form of the activities that will be necessary to exercise control over the financial risk attached to the provision of funding will depend on the riskiness of the investment for the funder, taking into account the amount of money at...
  6. TPG2022 Chapter X paragraph 10.210The accurate delineation of the actual transaction in scenarios involving captive insurance requires identifying whether the captive insurance is performing control functions regarding the economically significant risks associated to the underwriting function – in particular the insurance risk – to determine whether those...


Related Case Law

  1. France vs (SAS) SKF Holding France, October 2021, Conseil d’Etat, Case No. 443133RKS, whose business consists of the manufacture of very large custom bearings for the civil and military industries, is controlled by the Swedish group SKF through  (SAS) SKF Holding France. RKS was subject to a tax audit for FY 2009 and 2010, at...
  2. Belgium vs “Uniclick B.V.”, June 2021, Court of Appeal, Case No 2016/AR/455“Uniclick B.V.” had performed all the important DEMPE functions with regard to intangible assets as well as managing all risks related to development activities without being remunerated for this. Royalty-income related to the activities had instead been received by a foreign group company...
  3. Spain vs “X Iberica SA”, October 2019, TEAC, Case No Rec. 6537/2017“X Iberica SA” is a Spanish subsidiary of a multinational group and also a participant in the group’s cash pooling system, both as a borrower and as a provider of funds. When the group is not able to finance itself, the vehicle called...
  4. Spain vs “XZ SA”, March 2022, TEAC, Case No Rec. 4377-2018“XZ SA” is a Spanish parent of a tax consolidation group which is part of a multinational group. The Spanish group participates in the group’s cash pooling system, both as a borrower and as a provider of funds. The objective of cash pooling...
  5. France vs (SAS) RKS, October 2021, Conseil d’Etat, Case No. 443130RKS, whose business consists of the manufacture of very large custom bearings for the civil and military industries, is controlled by the Swedish group SKF through (SAS) SKF Holding France. RKS was subject to a tax audit for FY 2009 and 2010, at...