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FERMA publishes guidelines for BEPS on captive (re)insurance arrangements

On 20 June, FERMA has released proposed guidelines for captive (re)insurance arrangements in order to ensure a consistent implementation of the OECD recommendations on Base Erosion and Profit Shifting (BEPS).

Click above to read the document

 

The guidelines are meant to support national administrations when transposing BEPS actions into their national laws. They cover three areas which raised certain questions of interpretation by the OECD members during the implementation stage of the BEPS actions published in 2015: commercial rationale, substance and governance, and transfer pricing – premium setting process.

Jo Willaert, President of FERMA

FERMA’s aim in publishing this information report is to allow OECD members to assess, in a consistent manner, the compliance of captive (re)insurance arrangements with the BEPS recommendations. The report draws on contributions from all its 22 member associations. It explains the concept of captive (re)insurance companies, and for the first time, presents compiled data on premiums, profitability and taxation levels from a sample of 462 captives owned by European resident multinational companies.

The President of FERMA Jo Willaert says, The objective of such guidelines is mainly to avoid creating a patchwork of diverging national legislations inspired by BEPS. Captives serve an important Enterprise Risk Management role with true business purposes for European businesses and other organisations. Although captives are only a very small portion of BEPS, FERMA believes that national authorities should be guided in how to assess captive arrangements according to BEPS recommendations.

Carl Leeman - IFRIMA President

Carl Leeman, FERMA Board member and leader of the captive project group

 “Our document demonstrates that the main financial ratios of the captive insurance industry are in line with the traditional insurance market,” Carl Leeman, leader of the captive project group and a FERMA Board member, stresses. “The paper, enriched and approved by our 22 national associations, represents a strong consensus within the European risk management community on how captives are supporting the operations of their parent organisations.

This report is the first of its type. Although its data comes from European companies, it has global application because the BEPS recommendations are being adopted by many jurisdictions around the world. FERMA, therefore, presented the report to the International Federation of Insurance and Risk Management Associations (IFRIMA).

FERMA also discussed the paper in early June with the tax department of the OECD in the context of the upcoming Public Discussion Draft on Financial Transactions and Transfer Pricing expected this summer.

Press contacts

Typhaine Beaupérin, FERMA CEO: typhaine.beauperin@ferma.eu, tel: +32 (2) 761 94 31

Lee Coppack, press contact: lee@coppack.co.uk, tel: +44 208 318 0330/ +44 7843 089904


FERMA calls on Commission to include enterprise risk management in Non-Financial Reporting Guidelines

The Federation of European Risk Management Associations (FERMA) has told the European Commission that enterprise risk management (ERM) is the best method for companies to approach the new EU requirements for large companies to report on their non-financial or corporate social responsibility risks.

Capture cover consultation

Click above to read the response

This comment is at the heart of FERMA’s response to the Commission consultation on Non-Financial Reporting Guidelines, following article 2 of Directive 2014/95/EU on disclosure of non-financial and diversity information by certain large undertakings and groups. A large proportion of the 4700 European risk and insurance managers represented by FERMA work for companies that are within the scope of the Directive. As skilled specialists, they are responsible for managing the enterprise risk management process.

Under the Directive, which goes into effect in 2017, large public-interest entities, such as listed companies, should disclose in their management report relevant and useful information on their policies, main risks and outcomes relating at least to: environmental matters, social and employee aspects, human rights, anticorruption and bribery issues, and diversity in their board of directors.

FERMA President Jo Willaert said: “It is difficult for specialists in each department to connect different aspects of risk across functions, leaving grey areas where reporting may be incomplete. We, therefore, urge the Commission to recognise in the guidelines the fundamental role of risk managers and the value of ERM methodology in the reporting of non-financial or corporate social responsibility elements, which require a deep understanding of the business model of the organisation.

He added: “Risk reporting is a key element of the risk manager’s role. Because of the cross-functional nature of the risk manager’s mission, he or she is the best placed person in the organisation to provide assurance that the various types of risks, including those related to corporate social responsibility, have been identified and managed.

ERM is defined as a process “designed to identify potential events that may affect the entity, manage risk to be within its risk appetite and provide reasonable assurance regarding the achievement of entity objectives.” It is internationally set out in frameworks, such as the US COSO, and recognised in international standards.

FERMA has also told the Commission that the value of reporting the risks connected with non-financial elements of business conduct goes far beyond concern for reputation management. “Being in control of these risks opens the way for productivity and efficiency gains over the long term. The creation of a complete, company-wide risk management policy, including non-financial aspects, that leads to thorough risk knowledge should be seen as a global decision-making tool for the board,” stated FERMA in its submission.

CONTACTS
Ms Typhaine Beaupérin, FERMA CEO: typhaine.beauperin@ferma.eu, tel: +32 (2) 761 94 31
Lee Coppack, press contact: lee@coppack.co.uk, tel: +44 208 318 0330/ +44 7843 089904
All FERMA press releases can be found here.