Italian-owned captives have begun the process of re-domesticating back to Italy after negotiations with the regulator IVASS neared agreement.
Captive Intelligence understands the first Italian captive could be operating by the end of June with a second following later this year. Both captives are currently domiciled in European Union countries.
The strategy will be to form a new insurance entity in Italy, which acquires the shares of the legacy captive and completes a transfer of assets and liabilities. This should avoid a more costly run-off of the legacy captive.
Overseas captives, owned by Italian corporates, have come under greater scrutiny in recent years from the country’s tax authorities, especially with regards to transfer pricing.
As a result some captives, if domiciled in a jurisdiction with a significantly lower tax rate than Italy’s, are already paying a top-up tax to the Italian authorities.
Unlike in France, which passed captive specific legislation at the end of last year, the captive community in Italy is not pursuing a new legal framework as references to captives are already on the statute books.
The EU-wide Solvency II stipulates capitalisation and reserving requirements, but there is no equalisation provision (unlike in France and Luxembourg).
A stricter governance regime, compared to other European domiciles, will be enforced by the regulator meaning any captives that move ‘home’ or are formed in Italy are likely to be self-managed with key functions such as audit, compliance, risk and actuarial needing to be managed in-house rather than fully outsourced.
There are very few reinsurance companies in Italy, let alone captives, so it is new territory for the regulator.
As with France, it is not expected or an ambition of IVASS or the local insurance community for Italy to grow into an international domicile attracting captives from overseas.
It is envisaged that it will become a good option for Italian corporates and their own captives, although Captive Intelligence is also aware of new Italian-owned captives being established elsewhere including two expected to be licensed in Switzerland this year.
As examined in this April 2021 long read, there has been growing movement in Europe to consider home domiciling captives but there is debate as to the cost effectiveness and suitability of utilising ‘untested’ domiciles.