In 2002, the IRS issued guidance on captive insurance. The three new revenue rulings and a revenue procedure address deductibility of premiums paid to a captive: Revenue Rulings 2002-89, 90 and 91, and Revenue Procedure 2002-75. The
guidance is generally helpful and conveys the Service’s
acquiescence to valid captive arrangements. The revenue
rulings, in general, seem to be intended to do two things
(a) create safe harbors for formation of captives; and (b) make clear that the IRS will also be looking at the “other factors”
to which they referred in Rev. Rul. 2001-31. Additionally,
the revenue procedure makes it clear that the IRS will now entertain private letter ruling requests on captives.