Captive insurance will play an even more important role with the potential new developments from President Joe Biden’s new administration as the US Government rolls out potential new legislation and focuses in the space, according to Mikhail Raybshteyn, partner at Ernst & Young (EY).
Raybshteyn’s comments were made on a panel at World Captive Forum ‘Captive Market Trends: US Election Results and What's Next for Captives and Their Owners’ panel.
On the panel, he explains that Biden's administration proposals surround a number of areas including healthcare quality, climate, boosting certain manufacturing, boosting US productions, and potentially raising taxes.
Raybshteyn notes that Biden’s priority will be boosting manufacturing and increasing demand for US products with energy efficiency appliance upgrades, electric vehicles workplace child care facilities, and various other areas.
Although these areas may not particularly drive captives, Raybshteyn highlights these areas will bring additional risks and will bring the need for potential additional coverage.
He adds: “If we look at what companies are doing now and some that are already using their captive pretty efficiently to cover those coverages may be expanded.”
According to Raybshteyn, captives will play an important role as this coverage for the new proposals such as electric vehicles may not be readily accessible or companies may not get the coverage that they want.
Later in the panel, he also addresses President Biden’s corporate tax proposal stating that the US’ corporate tax currently stands at 21 per cent but Biden’s proposal raises it to 28 per cent.
He highlights the top individual rate will potentially change to 39.6 per cent from 37 per cent. He notes “that may impact the owners that are flow through entities or own captives through partnerships or individually”.
Commenting on if the change to the federal tax will affect the captive industry, Raybshteyn says he doesn’t know necessarily that rate will increase or decrease the number of captives.
However, he states that there will be moments, just as there were in prior years for various reasons and tax will just be more impactful or less impactful as a combined piece of that puzzle. But Raybshteyn suggests that it potentially may swing into getting a little more captives because there’s the fact that there is a tax benefit in the US for US own captives and for US owners.
Biden’s proposals will face stiff competition as Raybshteyn explains the current political atmosphere in the US. He outlines that even though there’s a Democratic President, there’s a 50/50 split at the Senate and the Democrats have a slight majority in the House.
