Although 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, the insured party could potentially receive significant upside relative to the premium paid whereas the insurer’s income will be limited to the insurance premiums and investment income it has received regardless of the quantum of risk reward received by the insured party).
TPG2022 Chapter X paragraph 10.196
Category: E. Captive insurance, TPG2022 Chapter X: Transfer pricing aspects of financial transactions | Tag: Accurate delineation, Assumption of risk / Risk assumption, Captive insurance, Financial transactions, Risk mitigation
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- 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...
- 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...
- TPG2022 Chapter X paragraph 10.195The 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...
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