Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Dear Sir:
This is to reply to your letter of September 5, 1986, with regard to the above-captioned matter. We also acknowledge receipt of your letter of October 7, 1986.
You have described two situations, one in which less than 1/2 of an insurer syndicate's business is conducted with a person who controls the syndicate and another where a syndicate insures the risks of its equal and unrelated co-owners. You wish to know whether and to what extent the principles ennunciated in the case of Consolidated-Bathurst Limited v. The Queen, 85 DTC, 5120, are regarded as applicable to these fact patterns.
We regret that we are unable firmly to opine on the situations submitted for our consideration since determinations of this nature are conditioned by the circumstances of a particular case and would therefore be best considered in the context of an advance income tax ruling where full disclosure of all material facts is of course necessary.
As the Consolidated-Bathurst case suggests, non-arm's length insurance arrangements are peculiarly incompatible with the concerns and controlling principles of insurance, much as the concept of indemnity, the determination of risk, the requirement of utmost good faith, and so on. We note, furthermore, that it is possible to interpret the Consolidated-Bathurst decision as denying the nature and quality of insurance to any arrangement to the extent that it involves an element of self-insurance. On the other hand, the Department acknowledges that mutual insurance is properly insurance and that the presence of some element of self-insurance is cccordingly not necessarily fatal to an arrangement whereby a taxpayer effectively insures his own risks as well as the risks of others.
It goes without saying that to the extent insurance transactions are inconsistent with ordinary industry norms, such arrangements may be susceptible of challenge under provisions such as sections 18(1)(e), 67, and 69 of the Act as well as subsections 245(1) and 245(2) of the Act.
We trust that the foregoing is of assistance.
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© Her Majesty the Queen in Right of Canada, 1986
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© Sa Majesté la Reine du Chef du Canada, 1986
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