The captive industry needs to educate the Organisation for Economic Cooperation and Development (OECD) so they have a better understanding of captive insurance, according to panellists at the 2018 Guernsey Insurance Forum.
Speaking on the substance in the insurance industry panel, panellists agreed that the OECD and tax authorities lacked a full understanding of captives and it was the industry’s responsibility to offer more education.
Jenna Coletta, insurance tax partner, international tax and transfer pricing, at EY, suggested the OECD’s current view of captives, particularly in low tax domiciles, is “quite negative”.
She added: “If you look at lots of the work that has come out to do with [the base erosion and profit shifting (BEPS)] project, clearly the industry would never stand by that. We need to make our voice heard and we need to educate the OECD to educate tax authorities.”
“There was a recent consultation which the OECD put out to the public and they received nearly 1,500 pages, a lot of which talk about the value of captives, why they are so important and that they are not just there for tax reasons, they’re there for valid commercial purposes.”
“We need to better educate tax authorities in my view.”
John English, CEO of Aon Captive and Insurance Management, suggested that “far more” interaction and dialogue was necessary with the OECD.
He said: “I think it is a question of dialogue and getting the point across, which I think we have failed to do so far.”
Paul Owens, managing director of Willis Towers Watson’s Global Captive Practice, agreed with panellists that there was a lack of understanding on the OECD’s behalf and emphasised the importance of the captive industry.
He said: “The captive industry is traditionally offshore and being offshore has a specific reputation and many people just don’t understand it. If the captive industry is not there where would that risk be insured?”
During the session, an audience member suggested involving the International Association of Insurance Supervisors (IAIS) in discussions with the OECD.
English was in support of this idea, and noted: “It needs to be a joint approach, getting the IAIS more actively involved in those discussions is a very good idea.”
According to Coletta, the OECD are “genuinely open to having these dialogues”.
Owens was in agreement and suggested that he was optimistic that dialogues with the OECD could be successful.
He said: “There is optimism that the OECD will regroup and understand what we do. I do think that we don’t come together enough.”
“There are only six and a half thousand captives but there is a huge amount of premium. Where would this go if the industry wasn’t there? There aren’t insurance companies out there that could adopt this.”