Saturday, June 15, 2024

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New French regime “could triple” captive number in France

Captive professionals in France have welcomed the all but passing of the 2023 Budget (PLF), which includes provisions for introducing a new captive regime in the country.

French risk management association Amrae has been lobbying hard for more than two years for legislation that would make it easier for captives to be established in France.

Prime Minister Elisabeth Borne announced on Thursday she would push the finance bill through without a vote, clearing the path for progress.

The existing French regulatory regime is not hostile to captives and since 2020 five new reinsurance captives have been formed in the domicile by French corporates.

Multinational payment and transactional services company Worldline established a captive in 2020, while food processing business Bonduelle and consortium Groupe SEB set up captives last year.

In October 2022 multinational advertising and public relations company Publicis Groupe got its captive licence, and Captive Intelligence understands another captive was licensed on Wednesday evening.

One of the key negotiating points to get a specific captive regime introduced in France was keeping hold of the equalisation provision already available to reinsurers in the country.

“France is a very interesting domicile for captives,” Laurent Bonnet, head of captive and alternative risk transfer solutions at Marsh France, told Captive Intelligence.

“The regulator is very approachable and supportive to develop captives in France. However, in an international competition, Luxembourg is far beyond France in that respect.

“The equalization reserve is definitely a key differentiator and there will be new captives for sure, but less than we could expect.”

Bonnet added that the success of the legislation would depend on an application decree which will establish the rules under which captives are formed and governed.

“We know the framework now, but we don’t know yet all the details. The devil is in the details.

“But if we benefit from a coherent legislation compared to the one in place in Luxembourg, then we should triple the number of captives in France in the coming years. And some captives based outside could be repatriated.”

French-owned captives have typically gravitated towards Luxembourg and Ireland, while there are also French captives in Malta, Switzerland and Guernsey.

It remains to be seen whether captives that are established in a domicile with a strong track record on captives will be tempted to re-domesticate now that the option in available.

TMF Group works with large European insurers, including several direct writing captives, on their insurance premium tax administration and compliance.

France-based Christophe Bourdaire, IPT quote content director at TMF, said they had been following the developments closely.

“With a focus on reinsurance captives, and a primary interest in domestic companies, it will be intriguing to see what interest is generated from local companies with many CAC 40 companies already having captives established in other European domiciles, such as Luxembourg,” Bourdaire said.

“We will wait to see if in the future provisions extend to the set up of direct write captives.”