b'TAX|CAYLOR LANDwith over 24,000 risks). In Avrahami, the court said$43,000. The captive paid the claims without that without any analysis (or mention of Rent-A- receiving requested information about the claims, Center) that three insureds are insufficient, butan action which the court noted is not standard admitted the more important piece of the analysispractice for an insurance company. Across the is the number of independent risk exposures. entities, the insurance covered 34 different exposures. All risks were located in Tuscon, Arizona. Caylor Land Risk distribution. The Tax Court examined whether Of the Le Gierse factors discussed in Part I above,the captive distributed the risk among a sufficient the Tax Court in Caylor Land did not treat thenumber of unrelated risks for the law of large micro-captive arrangement in the case as insurancenumbers to predict expected losses (as in other Tax for US tax purposes by finding that the arrangementCourt precedent). In finding the captive did not, the did not satisfy factors (a), insurance in theTax Court emphasized that in cases where a captive commonly accepted sense, and (d), risk distribution.arrangement was respected, captive insured risks were in the thousands. Second, the Tax Court In Caylor Land, a family owned a variety of entitiesreasoned that risk distribution is better supported in the business of commercial construction. Thewhere the risks are more independent than under Caylors historically purchased third-party insurancethe facts of Caylor, where all risks insured by the (and continued to do so during the years at issue),captive were related to the real estate business in a but decided to also form a captive insurancesingle geographic area.company in Anguilla with an election under section 953(d) of the Internal Revenue Code of 1986 (theCaylor Land does not expound upon existing risk Code), as amended, to be taxable as a USdistribution authorities. The court in Caylor Land corporation for US federal income tax purposes.stated that Caylor Land lacked a sufficient number The premiums deducted by the Caylor entities andof independent risks and that the law of large paid to the captive were $1.2 million each yearnumbers means more than the 34 independent risks covered by the decision (the then maximum amountinvolved in the case. This leaves a grey area permissible for the captive to pay no tax onbetween the 34 independent exposures assumed premiums received). Although 12 Caylor entitiesby the captive in Caylor Land and the thousands paid premiums to the captive, the Tax Courtaccepted as satisfying the law of large numbers that observed that one Caylor entity, Caylor Land, wascan be seen in other Tax Court precedents.the revenue generator for the family of affiliates,Insurance in the commonly accepted sense. In and all funds to pay the insurance premiumsfinding that the captive arrangement in Caylor Land ultimately flowed from Caylor Land. The premiumswas not insurance in its commonly excepted sense, in each year were paid before contracts for eachthe Tax Court held that (a) the captive did not act as year outlining that the insurance policies werean insurance company and the Caylor entities did drafted. During the three-year period of coverage,not act as insureds, since the parameters of a policy the captive paid four claims that amounted to 152|Global Insurance Industry Year in Review 2021'