Recent Developments & Issues; Segregated Accounts Companies

& Rent-a-Captives

SAC PANEL

• Andy McComb

President & CEO, CTC Allegro Insurance & Risk Management Ltd

President, Lansdowne Insurance Company, Ltd

• Brad Adderley

Partner, Appleby

• Jonathan Reiss

Partner, Ernst & Young

• Richard Irvine

Tax Partner, PricewaterhouseCoopers

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What is the prevalent presentation format for cell information in GAAP financial statements of SACs?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Should individual cells require their own audit opinion?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What will be the likely impact of the convergence of US GAAP with IFRS on SAC accounting?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Do contractual and/or statutory limitation of liability to individual cell assets affect whether the cell program can be accounted for as insurance?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What are the current 3 most significant issues experienced in the audit of SACs?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What is the status of IRS Notice 2008-19 (separate tax election for individual cells)?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Can a cell satisfy the “insurance risk” requirements of the IRS Code?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

In meeting the tax “insurance risk” requirement does the SAC violate its section 56 Direction if its committed to facilitating only “fully funded” programs?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Is a preferred share investment in a cell considered an investment in a Passive Foreign Investment Company?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

If a SAC structures its programs under Participating Agreements rather than Preferred Shares, and elects to be taxed as a US corporation, can it deduct “Good Experience Returns” or provision for “Good Experience Returns” as a tax expense?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Can the General Account or “Core” enter into a contract with an individual cell?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Under what circumstances can a cell transact business with another cell?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

If an individual cell has multiple owners, what is the potential liability of one of the owners for funding shortfalls of other co-owners?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Have there been any legal challenges to the sanctity of closed cells?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Is Bermuda considering legislation for incorporated cell companies (ICCs)?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What main advantages would ICCs offer over SACs?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What potential liability do the directors of SACS have in the event of the liquidation of a cell?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

With the expected increased regulation of the financial services industry, what is the regulatory outlook for SACs?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What are the main operational challenges arising from the credit crisis?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What is the prevalent business being facilitated by SACs this year?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

What do you consider “fully funded” with respect to meeting Board underwriting guidelines and/or regulatory requirements?

Segregated Accounts Companies

ACCOUNTING/AUDIT

TAXATION

LEGAL/REGULATORY

OPERATIONAL

Can a SAC make distributions from an individual cell ahead of receiving a release of policy liability or commutation of all reinsurance contracts?

Recent Developments & Issues; Segregated Accounts Companies

& Rent-a-Captives