Captive insurance association leaders believe working in collaboration, whilst recognising “who has the biggest dog in the fight”, is the right way to tackle global regulatory obstacles.

From: Captive Review – Nov. 8, 2016 
Speaking on the keynote panel at the European Captive Forum in Luxembourg today (Tuesday), representatives from the European Captive Insurance and Reinsurance Owners Association (ECIROA), the Captive Insurance Companies Association (CICA) and the Swiss Insurance and Reinsurance Captives Association (SIRCA) tackled the challenges in cooperating across borders to provide a united defence of the captive industry.

Quizzed by moderator Lieve Lowet, partner at lobbying firm ICODA European Affairs, the three panellists identified two issues that were a threat to them all – the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (Beps) project and the treatment of global insurance programmes by the International Association of Insurance Supervisors (IAIS).

On the latter Guenter Droese, executive at ECIROA, emphasised the importance of effecting change now. “The problems we are facing on a compliance level for global programmes are nothing new,” he said. “When I was an underwriter in the 1970s and ‘80s we knew what we were doing was not right, but we just did it and it worked. But today everybody has to be more aware of the potential consequences when they do not comply. It is an urgent issue because at the moment everybody is breaking rules.”

He added: “The Insurance Core Principles (ICPs) of the IAIS have to be changed, but they won’t discuss it with us or the industry. The IAIS only discusses this with the national supervisors.”

Dennis Harwick, president of CICA, conceded that the American captive market had needed to go through an education process to understand the relevance of Beps.

“The initial reaction in the United States to Beps was that it was coming from Paris so it must be a European problem,” he said. “We have had an educational problem in telling captives and their owners that the United States is a member of the OECD and so this will come home eventually. I think we have accomplished that, but people are still having some trouble working out how this will affect them.”

On a regional level, ECIROA said it also remained focused on Solvency II and the monitoring of its implementation across the EU domiciles, while Pete Hagnauer, manager of SIRCA, said the Swiss Solvency Test (SST) and general collaboration on behalf of its members with the regulator were its top priorities.

In the US, Harwick highlighted careful monitoring of the National Association of Insurance Commissioners (NAIC) and the ongoing attack on the smaller captives in the industry making the 831(b) tax election.

On the topic of collaboration, however, there was strong agreement that when the common interest unites them it is to all their benefit that they work together and consider who is most appropriate to take the lead.

“Bringing together the resources can only help,” Udo Kappes, chairman of ECIROA said. “We have already started this approach at ECIROA to working with CICA. We have also just recently approached FERMA (Federation of European Risk Management Associations) because they just published a good paper talking about the Beps topic.”

CICA and ECIROA co-authored a letter to the OECD earlier this year on the topic of Beps, but Droese said there needed to be a concerted effort to make them take notice.

“Unfortunately we can send in a lot of papers with good explanations, but no-one is reading and digesting it,” he added. “Nothing happens because of that.  So it is absolutely necessary that not only ECIROA, CICA and FERMA take action, but more are popping up. We must speak with captives and multinationals.”

Drawing on more than 30 years of experience in association management and “coalition building”, Harwick suggested it was important to recognise who was best positioned to lead the fight on each issue. This way, he said, you could achieve results much more effectively and efficiently.

“We ask ‘who has the biggest dog in the fight?’,” he said. “That should be the group that wants to be the lead. Playing a second support role is perfect and we don’t have to be the lead on every issue.