The Federation of European Risk Management Associations (FERMA) has opposed the introduction of additional regulations for European captive insurance companies, urging the OECD to rely on existing international regulations when it publishes new guidelines on transfer pricing and value creation.
Responding to the OECD public discussion draft document, ‘BEPS Actions 8-10 Financial Transactions,’ FERMA claimed that further layers of regulation are liable to create a risk of more confusion and uncertainty.
Additional regulations will also ultimately lead to more administration for multinationals and tax authorities without providing the desired outcomes for tax purposes, FERMA said.
The Federation added that, in its view, IFRS 17 and the International Association of Insurance Supervisors (IAIS) already provide definitions for terms which OECD is considering, such as ‘general insurance transaction’ and ‘insurable risks.’
IAIS guidelines outline strict control of captive functions such as direction, underwriting, actuarial and accounting expertise, while Solvency II regulations also apply to captives, proportional to their size and activities.
Nevertheless, FERMA stated that it was pleased that captive insurance companies are now more generally perceived as a way for multinational groups to manage risks within the group and that they are a component of a risk and insurance management strategy.
It concluded by urging the OECD to continue its dialogue with European multinationals and their risk managers.
