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Tax Issues Complicate Wind-Downs Of Insolvent Insurance Cos.

Procedures to unwind troubled insurance companies can be complicated by unforeseen tax issues, blindsiding stakeholders—regulators, creditors, owners of troubled companies, and even healthy ones included in consolidated returns—at a time when none of these parties is focusing on the Internal Revenue Service.

By Michael Callan, Susan Leonard, Mark Lynch, Patricia Gergen | Updated on July 14, 2011

Tax issues arising in an insurance-company conservation or liquidation proceeding can be as complex as regulatory and legal ones—potentially blindsiding stakeholders at a time when they’re not focusing on the Internal Revenue Service.

Regulators and creditors, as well as managers and owners of the troubled companies—and of healthy ones included on consolidated tax returns—should be aware of some of the common tax issues, including the potential for consolidated filings and tax-sharing agreements to impede the wind-down process.

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