Avrahami ruling provides additional clarity for small captives

01 September 2017

  • The U.S. Tax Court Issues Long-awaited Ruling on Avrahami Captive Case
  • Ruling Provides Additional Clarity for Captives, says JLTIM’s Towle 

BURLINGTON, VERMONT (AUGUST 28, 2017) – In a long-awaited ruling, the U.S. Tax Court ruled for the Internal Revenue Service in Benyamin Avrahami & Orna Avrahami, et al. v. Commissioner Of Internal Revenue.

The case revolved around the establishment by the Arizona couple of a captive under Internal Revenue Code Section 831(b) to insure a very narrow risk through its captive insurance company, Feedback Insurance Company, Ltd., and a pooling arrangement.

“This ruling finally provides additional clarity for captives organized under Section 831(b),” says JLTIM’s Consulting Practice Leader and Executive Vice President Anne Marie Towle. “As captive insurance professionals, we always seek this added measure of clarity. This ruling provides clear guidance, as the court ruled that Feedback had a poor fact pattern.”

The court ruled that Feedback did not meet the risk distribution, risk shifting and “common notion of insurance” requirements typical of an insurance company.

“Micro captive owners who operate their captives for legitimate risk-transfer and follow best practices, including those managed by JLTIM, should not be impacted by this ruling,” adds Towle.” As an industry best practice, we don’t recommend that our clients utilize third-party risk pools to qualify as an insurance company for tax purposes. If any captive owner has concerns, we will be happy to answer their questions.”

Contact us to learn how we can assist you with all of your risk management and risk financing efforts.



Elizabeth Miller

Tel: +1 215 309 4590
Email: Elizabeth.Miller@JLTRe.com

Anne Marie Towle
Tel: +1 317 922 4390
Email: Annemarie_towle@jltimusa.com


About JLT Insurance Management (JLTIM) USA

JLT Insurance Management (JLTIM) USA is an independent, full-service captive insurance management and captive consulting company with a multi-domicile reach.

JLT Insurance Management (JLTIM) USA is a part of Jardine Lloyd Thompson Group


About Jardine Lloyd Thompson

Jardine Lloyd Thompson is one of the world’s leading providers of insurance, reinsurance and employee benefits related advice, brokerage and associated services. JLT’s client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.

JLT is quoted on the London Stock Exchange and owns offices in 40 territories with more than 10,600 employees. Supported by the JLT International Network, it offers risk management and employee benefit solutions in 135 countries.

For further information about JLT, please visit our website www.jlt.com.


This is intended to provide only general information based on sources we believe are reliable.  JLTIM makes no representations or warranties, express or implied, as to the accuracy of any of the information herein, which is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Any statements concerning tax, accounting, legal or regulatory matters should be understood to be general observations based solely on our experience as captive managers.  We are not tax, accounting, legal or regulatory professionals and any such information provided is not professional advice.  These matters should be reviewed with your own qualified advisors in these areas