San Diego
20 March 2017
Reporter: Becky Butcher

Captive industry meets covered agreement with mixed response


Industry response to the covered agreement between the EU and the US has been interesting and varied, according to panellists at the Captive Insurance Companies Association (CICA) International conference

The panel discussed the agreement between the EU and the US Treasury and the Office of the US Trade Representative (USTR), completed on 13 January. The agreement provides a mutual agreement of prudential supervision in the EU and the US that will eliminate the increasing barriers to US groups operating in Europe.

Panellists explained that the agreement was needed because the European Commission has not deemed the US as an equivalent jurisdiction under the Solvency II Directive, which means US companies would need to cover a lot of additional requirements in order to do business in the EU.

The agreement eliminates the requirement for a local place of business in the host jurisdiction and the requirement for collateral. It applies to companies that have more than $250 million in capital, and those with the equivalent in euro for EU countries.

Skip Myers, partner of the insurance group at Morris, Manning and Martin, suggested that reaction to the agreement has been interesting. The National Association of Insurance Commissioners (NAIC) has been particularly troubled by it, he said. Although it wasn’t a part of negotiations, it was an observer.

The NAIC has raised concerns about not being able to vote on the decision and around transparency, and is concerned about the provision in the agreement for foreign jurisdictions to have regulatory authority over a US company.

Myers said the NAIC is looking at the agreement and is preparing amendments to submit to the US Treasury.

Other bodies, including the Reinsurance Association of America, believe the agreement brings some predictability to their members’ participation in the European markets, and vice versa, according to Myers.

Jim McIntyre, partner of McIntyre & Lemon, added that, while the agreement might not have any direct effect on captives, it could eliminate some barriers and stabilise pricing, which is good for captives.

Finally, the panel discussed possible changes around the Affordable Care Act (ACA). Panellists suggested that, although President Donald Trump and the Republicans plan to repeal or replace the ACA, it’s unclear what the replacement will ultimately look like. Myers said: “The change, on balance, could be good for captives”.

He added: “Captives now, even under the ACA, have grown in the healthcare space in terms of medical stop-loss for employer plans and that will continue to grow. The fact the states will be more involved [will be positive]. I think we are heading for a system where there is more state control, which I think is a good thing for captives.”

More news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Customer service is key to captive redomestications
23 August 2017 | Charlotte | Reporter: Becky Butcher
Customer service is key to attracting potential captive insurers to a particular jurisdiction, according to Leanne Refalko, senior captive insurance specialist at the North Carolina Department of Insurance
Hawaii appoints new insurance administrator for commerce
23 August 2017 | Honolulu | Reporter: Jenna Lomax
The state of Hawaii has promoted Andrew Kurata to acting insurance administrator for the department of commerce and consumer affairs insurance division
Experts react to Avrahami
23 August 2017 | Washington DC | Reporter: Becky Butcher
The US Tax Court’s decision to back the Internal Revenue Service in its dispute with Benyamin and Orna Avrahami over their micro captive should encourage those involved in similar arrangements to revisit them
NCCIA: North Carolina’s captive figures almost doubled in 2016
22 August 2017 | Charlotte | Reporter: Becky Butcher
The number of North Carolina’s licensed captive companies grew by 91 percent last year, while approved protected cells and series saw an increase of over 50 percent
NCCIA praises captive industry for work
22 August 2017 | Charlotte | Reporter: Becky Butcher
The North Carolina Captive Insurance Association Annual Conference kicked off this week with Thomas Adams, president and CEO, thanking those in the industry who have helped make the state’s captive market the success it is today
Willis Towers Watson reinforces employee benefit captive consulting
22 August 2017 | London | Reporter: Mark Dugdale
Willis Towers Watson has hired Paul Devitt as director in its global services and solutions consultancy practice, where he will focus on employee benefit captive consulting
Disappointing outcome for micro captives in Avrahami
22 August 2017 | Washington DC | Reporter: Becky Butcher
The US Tax Court has backed the Internal Revenue Service’s decision to deny Benyamin and Orna Avrahami access to the Internal Revenue Code Section 831(b) election for certain financial years