20 January 2017Analysis

Trump presidency has potential ramifications for captives in 2017

The political and socioeconomic changes in 2016, such as the election of Donald Trump as president of the US, could bring significant changes to the captive sector, according to two senior executives interviewed by Captive International.

Captive International asked a number of captive executives for their opinions on what will be some of the more prominent issues facing the industry in 2017.

The election of Trump was cited as having potential ramifications for the captives industry, but to what extent remains to be seen.

On the one hand, Trump’s plan to clamp down on regulations could benefit captives, with lighter regulatory burdens potentially removing some of the negative stigma surrounding them, according to David Kirkup, chief financial officer and chief operating officer of Captive Alternatives.

On the other hand, the lower tax rates under a Trump presidency may reduce demand for captives as a whole, Kirkup suggested.

Although it is unclear of how it will pan out, Kirkup said that the Trump administration is sure to have an effect on the development of new captives.

Trump had previously said in a video covering the transition and policy for his first 100 days as president that he would promise to eliminate two regulations for every one enacted.

As laid out in his list of policies, Trump plans to ask all department heads to submit a list of “every wasteful and unnecessary regulation which kills jobs, and which does not improve public safety, and eliminate them.”

Ian Clancy, practice leader at Marsh Captive Solutions, suggested that these political and socioeconomic changes in 2016, including both Trump’s election and the UK’s vote to leave the referendum caught many by surprise, and may have wider implications for the captives sector.

Clancy said: “2016 brought some political and socioeconomic change which caught many by surprise. The Brexit vote in the UK was not widely expected and the election of a new US President whose pre-election pronouncements indicated greater focus on domestic issues than on international cooperation also challenges historical positioning.”

Similar to Kirkup, the impact Trump has on the captive industry will remain to be seen, but he said there is no doubt it will have an effect.

“Captives thrive on cross-border freedoms and on global insurance programme integration—if the ‘new world’ we are now entering becomes overly protectionist at a country level, additional hurdles will need to be crossed if the industry is to continue to develop. “‘Inappropriate scare-mongering’ you may say—no, just a realistic recognition that the world is undergoing change in terms of the way it conducts its business and, as a viable business tool within that world, captives will need to adapt to this change themselves.

“The challenge is not new—over time we have responded to liberalisation of markets in the EU with the various directives; to ever-evolving tax regimes and requirements; to accounting and reporting modifications and topically again, to governmental challenges to non-resident entities and profits.”

In total senior executives from Willis Towers Watson, Marsh Captive Solutions, the Federation of European Risk Management Solutions, the Captive Insurance Companies Association and Captive Alternatives participated in the examination of 2016 and their outlook for 2017. To read the full transcript of their thoughts and comments, please click here.

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