How the CFM Decision Is Reshaping Captive Insurance Tax Standards

Recorded live at the Captive Insurance Companies Association 2026 International Conference, this episode of The Edge of Risk Podcast by IRMI features Kristen Lawler discussing one of the most closely watched captive insurance tax decisions in recent years: the 2025 CFM Insurance Tax Court memorandum opinion. Drawing from her recent article in IRMI's publication Captive Insurance Company Reports, Ms. Lawler explains how the case highlights the growing importance of operational discipline, governance, documentation, pricing support, and claims handling in determining whether a captive arrangement qualifies as insurance for federal tax purposes. The discussion explores the "commonly accepted notions" prong of the four-part insurance test and why it has become an increasingly significant focus of Internal Revenue Service scrutiny and Tax Court analysis. Ms. Lawler examines how the court evaluated risk distribution, premium practices, policy issuance, and state licensure issues under the McCarran-Ferguson framework, while also outlining practical questions captive owners should be asking their advisers today. The episode offers timely insight for captive owners, tax professionals, actuaries, and risk managers seeking to better understand how operational rigor and economic substance continue to shape the captive insurance landscape.