Insurance Europe has published its response to a consultation by the Organisation for Economic Co-operation and Development (OECD) on the exclusion of regulated financial services, including reinsurance, from its Pillar One tax rules.
The industry welcomes the fact that reinsurance has been included in the list of regulated financial services to be excluded from Pillar One. At the same time, there is no consensus in the Inclusive Framework and it is, therefore, important to reiterate why these businesses are correctly being excluded.
Reinsurance meets all the key elements of the definition for regulated financial services: namely firms have a licensing requirement, regulatory capital requirements and they undertake the required activities.
Reinsurers are also global companies, and it is part of their business strategy to have an effective local presence via subsidiaries and permanent establishments in relevant markets.
In general, the OECD should provide more clarity on definitions, as well as examples to guide the application of the rules and to avoid unnecessarily cumbersome requirements. In addition, the definition of “insurance contracts” provided in the text might not fully reflect the diverse risks covered in the insurance market.