French group triggers plan to repatriate Luxembourg captive back home

French aerospace group Safran has told Commercial Risk that it is relocating its reinsurance captive company from Luxembourg back to France.

The process of creating the new captive Soreval France is currently underway and should be concluded by June, the firm confirmed.

According to Safran’s latest registration document, the company’s Luxembourg captive helps manage civil aviation liability, property damage and business interruption risks, all within an operational risk management framework. Safran reported revenues of €19bn in 2022.

It will be one of the first French companies, or perhaps the first, to bring its captive back home after updated tax accounting rules were implemented in France last year to make the country a more attractive captive domicile.

Organisations like French risk and insurance management association AMRAE have stressed that captive repatriation was not the main goal of the new rules, and that they are not expected to become a common phenomenon.

However, the Safran example shows that companies are considering this option and that it may be a viable alternative to save costs and improve the efficiency of captives. At least one other repatriation plan is under study, sources told Commercial Risk.

The new rules have generated huge interest in creating captives in France, with AMRAE estimating that the number could reach 30 by the end of this year.

At the end of January, ACPR, France’s insurance supervisor, approved the creation of Assurepost Re, the reinsurance captive owned by La Poste, according to media reports. It was the sixth approval by the body since the implementation of the new tax accounting rules in June 2023.

The rules have significantly raised the interest in captives among French companies, including those that are smaller than traditional captive owners.

The rules have granted more flexibility for French companies to build up provisions for future losses, bringing the country’s legislation closer to the equalisation principle enacted by Luxembourg, one of the world’s main jurisdictions for reinsurance captives.

Since then, insurance groups such as HDI have boosted their captive services capabilities in Paris to cater for the new demand by French companies.

A recent report by reinsurance group Scor estimated that 76% of all French captives were located in Luxembourg by the end of 2022, and the rest in Ireland.

At the time, there were 45 captive companies owned by French groups outside of France.