St Julians, Malta
04 October 2016
Reporter: Becky Butcher

FERMA: Drop in number of companies using captives

The number of companies using captives has fallen from 39 percent in 2014 to 34 percent in 2016, according to the eighth edition of the European Risk and Insurance Report 2016, released at this year’s Federation of European Risk Management Associations (FERMA) Risk Management Seminar.

The report, which is released every two years and reports the views of over 600 risk and insurance professionals in over 21 countries, revealed that the use of captives remains more prevalent in financial services, banking and mature insurance markets, compared to any other industries. Company size is also a key driver for take-up of captives.

FERMA said in the report: “This result is consistent with our concern about the significant increase in the operational cost of captives following the implementation of Solvency II and the higher scrutiny on captives by governments when implementing the OECD’s recommendations on BEPS.”

“In addition, FERMA believes it is crucial that tax authorities take into account the positive contribution to enterprise risk management that captives represent for multinational organisations in protecting their assets.”

According to a FERMA Seminar panellist, Philippe Gouraud, global head of strategic client and broker management at XL Catlin, captives are here to stay. However, he noted that, because captives are complex, there are a number of consequences.

Gouraud said: “The bar for captives is much higher to pass than it was in the past because they’re in a more complex environment, whether that be because of the compliance or governance.”

However, he revealed that the captives that have been used are being used “more intensively” than before. He said: “The captive has a strategic role to play around innovation.”

The results of the report also show that the implementation or further use of captive facilities has decreased by 6 percent since the last survey in 2014.

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