I think most of us were surprised that Donald Trump won the election last week based on all the polling data that was out there. Just goes to show you that even in the risk management world with all its data, analytics, actuaries and experts, there was no figuring out this election!
That being said, just what might a Trump presidency mean for captives? Well, quite honestly, I would be surprised if captive insurance makes any list the transition team may be preparing right now; however, there may be some areas that could impact captives:
1. Dodd-Frank. Trump has said all along he wants to repeal the regulations set out in Dodd-Frank, but I think that is easier said than done. There are numerous interest groups on all sides who have a stake in the Act, and it will be slow going to push through reform even though the Republicans control Congress. That being said, House Financial Services Chair Jeb Hensarling outlined a bill earlier this year that would change some key provisions of the Act, without repealing the whole thing – provisions that might have a chance to pass. The Nonadmitted & Reinsurance Reform Act (NRRA) that was attached to Dodd-Frank when it was passed, is not in anyone’s crosshairs as far as I can tell, but VCIA’s work to seek clarification of the NRRA might move more quickly.
2. 831(b)s. It is no secret that Republicans have no love-lost for the IRS. Perhaps we will see a change in attitude regarding micro-captives (and all captives) once a new commissioner is confirmed.
3. FHLBs. Similarly, with a change in leadership at the Federal Housing Finance Agency (FHFA), perhaps we will see an acquiescence allowing captives to be able to “rejoin” the Federal Home Loan Bank program.
4. FIO. With a new Secretary of the Treasury, there will be wholesale changes throughout Treasury. The Federal Insurance Office within Treasury will most likely take more of a backseat to the NAIC on insurance issues, and probably let go of any concerns with the captive insurance industry it may be harboring. We may even see less cooperation between the US and Europe (and the rest of the OECD) on insurance regulation harmonization.
Now there are a whole slew of issues that President-elect Trump can and will affect in his tenure that can impact captives, from taxes to the economy to foreign policy, outside some of the more direct issues outlined above. Time for all you analytic gurus to get to work!
Thank you all very much, and I look forward to hearing from you.