Captive growth expectations in the EMEA region
Talking with captives, captive associations, regulators and representatives of the domiciles, it is clear that most jurisdictions in the EMEA region are predicting continuing moderate growth despite a host of pressures. Economic pressures may have buffeted the sector and reduced investment returns, Solvency II may loom large as an as yet unqualified threat and a soft commercial market might well have reduced the attraction of captive ownership, and yet consensus remains that captive growth is set to continue.
Across Europe, the domiciles are predicting something of a rebound after a difficult few years set against the backdrop of the global downturn. Asked if they were expecting growth moving forward, Malta Finance set the scene, predicting “moderate rates of growth reflecting the rate of global economic recovery counterbalanced by current soft market conditions”. Other European domiciles echoed their sentiments, with Gibraltar Finance indicating that it was “still expecting growth in the coming years”. Gibraltar also predicted that with “certain insurance markets hardening”—and one would imagine that sooner or later others will follow suit—prospects for growth were good. Zeroing in on specific vehicles, Guernsey Finance indicated that the island “continues to see growth particularly in the use of cell companies”, with innovative captive formations further helping to buoy the sector.
In the Middle East, a positive future is also envisaged, with Kane citing the “shifting macro economy and the rise of sovereign wealth” as likely spurs to captive and wider economic growth. Kane admitted that the captive concept would take time to “bed down and for the Middle East captive market to properly develop”, but citing Qatar, said that its positive approach to captive development has meant that there are predictions that 15 new captives will opt to domicile in the Emirate in the coming years. Particular interest was expected in the ability to “structure takaful and retakaful captives” in the region, with Kane indicating that the area “holds great promise” for such Sharia-compliant vehicles.
The keys to growth It seems that the existing strength of expertise and the responsive regulatory environment of the European jurisdictions are seen as key to further growth. Jersey Finance indicated that “with the finance sectorworkforce numbering more than 12,500 and the necessary skills sets to support a growing insurance sector, Jersey has the capacity to build business among insurance providers”. Guernsey likewise pointed to the strength of expertise and experience: “We are a mature captive domicile and we have built a reputation for experience, expertise and innovation that continues to attract clients from a diverse range of industry sectors internationally.”
Concerning the regulatory environment, the domiciles made clear that a conducive regime was an essential element of the captive offering, with Gibraltar indicating that its “robust, yet responsive, regulatory regime continues to ensure that Gibraltar is an attractive location within the European Union”. Jersey, for its part, spoke of its “robust legal framework”, while Guernsey spoke of its “robust, yet pragmatic, regulatory environment”, and it remains clear that regulation that attends to the needs of the captive sector is a key differentiator in domicile choice. In the Middle East, Kane said that jurisdictions such as Bahrain, Qatar and the UAE had likewise introduced “bespoke captive legislation”, as the domiciles look to reach for further levers of growth.
Finally, tax and proximity to key markets were outlined as further factors in the growth potential of captive jurisdictions. Both Jersey and Gibraltar cited their favourable tax status as being beneficial to future growth prospects, with Jersey’s “tax-neutral” position and “Gibraltar’s tax regime regaining its attractive position with an overall low rate of tax within a European context” both potential boosts to future growth prospects. Jersey further indicated that its “extremely close business links with the City of London” made it an “ideal fit for the wholesale insurance market, including the captive industry”, with the domicile aiming to leverage its close connections to the advantage of its captive sector. Middle Eastern jurisdictions for their part, are hoping that their position on the crossroads of Europe and Asia will make the region an attractive option when companies consider the domicile of their captive boards, heightening interest in the region’s potential.
As everyone knows, confidence breeds success, and so if industry voices are anything to go by, captives are set to enjoy a bright future in the EMEA region and beyond.
Captive, insurance, EMEA, formations, growth