Captive insurance market must stand ground on BEPS in 2017


The Base Erosion and Profit Shifting (BEPS) action plan launched by The Organisation for Economic Co-operation and Development (OECD) could bring further scrutiny to companies using captives, according to a number of senior executives interviewed by Captive International for their views on what the biggest issues of 2017 will be.

It is important that the industry “fights its corner” and educates both politicians and regulators of the true purpose and value of captives as a risk management tool, said Ian Clancy, practice leader for EMEA and Asia-Pacific at Marsh Captive Solutions.

As 2016 drew to a close, Captive International asked a number of captive executives for their opinions on what will be the more prominent issues facing the industry in 2017.

A number of them cited the continued impact of the BEPS action plan put forward by the OECD in 2015, which could have significant ramifications for some companies.
“Unfortunately, despite the industry’s best efforts, there remains a stigma (albeit minor) associated with captives so that some observers believe that tax avoidance is a key driver in utilisation,” said Clancy.

“This is not the case. Captives are primarily, and always have been, risk retention vehicles and a large majority of the captives in existence today have no tax benefit associated with them whatsoever.”

Introduced in 2015, the BEPS initiative was designed to counter tax planning strategies that exploit gaps and mismatches in tax rules to shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

The OECD continued to hold a negative perception of captives in 2016, suggested Dennis Harwick, president of the Captive Insurance Companies Association (CICA).
“On a more expansive scale, the OECD in Paris continued its push to characterise captive insurance companies as ‘base erosion/profit shifting’ (BEPS) devices,” said Harwick.

“Although the OECD and its BEPS Report may seem like far off thunder, it has the potential to rattle the captives industry, particularly the offshore domiciles.”
And the issue of BEPS, unlike Solvency II which was restricted to Europe, could impact the industry as a whole, according to Paul Owens, CEO of the global captive practice at Willis Towers Watson.

Owens said: “Unlike Solvency II it is a global issue not isolated to Europe. Developing and implementing plans to address BEPS issues are likely to dominate many discussions and may drive some significant changes in the industry.”

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.


Captives, BEPS, Regulation, OECD, Marsh Captive Soltuions, CICA, North America

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