Captive Review June Edition

The theme of this June edition of Captive Review is most certainly the big picture. We address issues including the United Kingdom’s vote on whether to stay in or leave the European Union, the continued fallout from the Panama Papers controversy and the impact (or not) of collapsing oil prices on energy captives.

It is fair to say that 2016, despite being charitable in leaving the run up to Solvency II to its less fortunate predecessors, continues to deliver a host of challenges and uncertainties to the captive industry and its most important constituent – owners.

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However, Europe and the United States produce contrasting perspectives. Aside from rising self-procurement tax concerns, the American market appears to be facing far fewer obstacles than the Europeans.

The OECD’s Base Erosion and Profit Shifting (Beps) project attracts little attention or worry on this side of the Atlantic, while the US domiciles continue to plough ahead with revamped business friendly statutes as fierce internal competition drives an impressive increase in captive numbers.

The Chicago Captive Owners Summit, held on 2 May, did address the topic of self-procurement tax and I was pleased to be joined by complianceDNA’s Asher Harris, Beecher Carlson’s Jason Flaxbeard and Dan Towle, from the State of Vermont, to debate this important issue. One of the key conclusions was the level of misinformation currently doing the rounds within the industry and, while each situation is unique, it is important to be wary of opportunistic service provider activity.

The, at times, dark and divisive cloud that is the 831(b) tax election threatens to evaporate as service providers begin to untangle what the legislation passed by Congress at the end of 2015 actually means for future ownership structures. If the industry manages to pull itself out of that unsavory hole with minimum damage, there appears to be little in its way.

In Europe, however, Beps is going to be a real problem and it seems the industry is finally waking up to this threat. Aon has published its own white paper on the topic, while Zurich has already teamed up with EY to help provide some guidance. The United Kingdom’s Diverted Profits Tax has been well documented as a piece of legislation inspired by the Beps project, but Captive Review understands other developed economies outside of Europe – including Canada, South Africa and Australia – are pursuing captives as vehicles perceived to be indulging in base erosion and profiting activity.

I expect Beps to become the ‘new Solvency II’ in Europe – while it may bore us all to death at times, it requires serious attention and a more joined up industry approach (including service providers, associations and, most importantly, owners) is essential to alter the perception of captives in this context.

On a separate note, I would like to say congratulations to Christopher Lay. It was announced on 10 May that Chris will be leaving Marsh Captive Solutions, which he has led for almost two years, to take on the president and CEO position at Marsh Canada. Having spent a considerable amount of time with Chris over the past two years, I found him to be an informed and valuable addition to the industry. I wish him well.

Lastly, I am pleased to announce that Andrew Walsh, a New York-based attorney in Anderson Kill’s captive insurance group, was the lucky winner of Captive Review’s 150th Edition Captive Crossword. Andrew was among 100 entries to the competition and will enjoy a two night stay at the Fairmont Southampton Resort, in Bermuda. Congratulations Andrew and thank you to our partners the Bermuda Business Development Agency for supporting us in celebrating our 150th edition.

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