Italian Regulator Open to Captive Insurance Company Formations

ANRA, Italy's risk management association, has held advanced discussions with the local insurance supervisor, IVASS, about authorizing and regulating captive insurance companies in the country.

Italian corporations have traditionally utilized established captive jurisdictions, such as Ireland, Luxembourg, and Malta inside the European Union, as well as Switzerland, where a handful of large Italian captives are domiciled.

Speaking to Captive.com in his capacity as president of ANRA, Alessandro De Felice, chief risk officer at Prysmian Group, said IVASS is interested in understanding the differences between the Italian regulatory framework and those in European captive centers.

"If we compare with Ireland, for example, there is not such a big difference in terms of compliance, reporting, Solvency II methodology, and capitalization of captives," Mr. De Felice said. "We came to the conclusion that currently it is absolutely possible to incorporate your captive in Italy. If the application is good, a captive can be authorized in Italy within 3 months."

Developments in Italy follow news at the end of 2020 that the French government was considering introducing legislation that would facilitate a captive regulatory framework. Mr. De Felice does not expect new legislation to be necessary in Italy.

Mr. De Felice said European risk management communities are increasingly concerned about the interpretation of transfer pricing rules that threaten the use of captives in traditional specialist centers.

A captive domiciled in Italy would be faced with a corporation tax rate of 24.5 percent, compared to 12.5 percent in Ireland. At present, however, some captives are already paying the difference to the Italian tax authorities so as not to run into transfer pricing challenges.

"It could be more cost effective and easier to manage a captive if it is in your home country—in this case, Italy," added Mr. De Felice. "This could be a moment to reassess if your captive is in the right jurisdiction. But it depends on the rationale of your captive. If you have a business model where your risks are mostly spread all around the world and you just have the headquarters in Italy, then this could be a different situation."

While moving an existing captive from another jurisdiction to Italy is expected to be a longer and more complex process, Mr. De Felice is confident Italy's first captives could be formed in 2021.

"I think it is possible we will see captives formed in Italy this year," he said. "For new captives being established, it is going to be a bit easier."