14/12/2018

FERMA and Captives in 2018 - Looking in the rear-view mirror

oecd map captive

In 2018, FERMA has deepened the dialogue with OECD on BEPS and worked with its member associations to monitor the application of Solvency II and ensure that proportionality is better considered in the ongoing EU review of Solvency II.

In September, FERMA provided a detailed response to the OECD consultation on transfer pricing and financial transactions. Since then, we have had direct confirmation from OECD that our input is being considered with a working party of six OECD countries. The next step for FERMA is now the review of a so-called “consensus document” by the OECD early 2019.

The OECD discussion draft offered yet a better understanding of captives as small insurance enterprises, especially by suggesting that they are regulated entities. The perception of captive insurance companies has improved; they are now seen as a way for multinational groups to manage risks within the group and a component of a risk and insurance management strategy.

FERMA has been advocating for a proportionate treatment of captives under Solvency II in its role as a member of the Insurance and Reinsurance Stakeholder Group (IRSG) at EIOPA.  In early October, FERMA succeeded in introducing in the final IRSG informal advice on Solvency II Guidelines on System of Governance a request for a better assessment of the actions adopted by national authorities in relation to proportionality.

For Laurent Nihoul, FERMA board member and chairman of the captives working group: “FERMA’s efforts are not aimed at reducing or relaxing the regulatory requirements but making constructive suggestions to achieve better proportionality and more efficiency in the way regulation is applied. More proportionality should never compromise regulatory objectives and core principles.”

FERMA will continue to advocate the value of captives as a genuine risk management tool for multi-national organisations.