19/09/2018

FERMA says new regulations are not needed for European captives

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FERMA has urged the OECD to rely on existing, widely accepted international regulations governing captive insurance companies when it publishes new guidelines on transfer pricing and value creation. This is part of the discussion contained in FERMA’s response to the OECD public discussion draft document: “BEPS Actions 8-10 Financial Transactions”.

FERMA’s view is that a further layer of regulations to be applied by national regulatory authorities could create a risk of confusion, uncertainty and ultimately more administration for multinationals and tax authorities without providing the desired outcome for tax authorities.

In its comments, FERMA said that IFRS 17 and the International Association of Insurance Supervisors (IAIS) already provide definitions for terms which OECD is considering: “genuine insurance transaction” and “insurable risks”. FERMA added that IAIS guidelines are also extremely stringent about the control of various functions of a captive such as direction, underwriting, actuarial and accounting expertise. Solvency II regulations are applied to captives as they are to all other insurance companies, but in a manner proportional to their size and activities.

At the same time, FERMA stated it was pleased that captive insurance companies are now more generally perceived as a way for multinational groups to manage risks within the group and that they are a component of a risk and insurance management strategy.  FERMA urged the OECD to continue its dialogue with European multinationals and their risk managers.

 

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