Is there any conflict of interest in entering into a group captive or single parent captive for a REIT.
I work with several group captive's. Some of the REIT's that we deal with have expressed a concern that there is a potential for a conflict of interest in moving there insurance program out of a guaranteed cost structure into a group captive or single parent captive structure. In my opinion as long as the manager is acquiring the coverage at market value and the residual income is distributed appropriately then there really is no conflict.
Does anyone have an opinion in this area?
Thank You,
Robert P. Engles
The Mahoney Group
(623) 215-1380
REngles@MahoneyGroup.com
Good Answers (1)
Kris D
Attorney Captive and Offshore Insurance
Best Answers in: Commercial Real Estate (1), Risk Management (1)
Hi Robert,
As long as the folks that invested in the REIT participate in the profits from the captive, it seems you wouldn't have a conflict. The REIT has to shift a risk to the captive in order to qualify as insurance, but the folks that own the REIT can also own the captive. See Rev Rule 2002-89. You can find a copy on my web site at www.CaptiveApplications.com. Good luck.
