14 June 2018Analysis

Innovation in captives shines light on sector’s true growth

While the number of captives being formed in Bermuda has stagnated in recent years, levels of innovation within the sector are more than making up with this with companies using their captives to manage more complex risks in increasingly sophisticated ways.

That is the view of Michael Parrish, chairman of the Bermuda Captive Conference, which is taking place this week at the Fairmont Southampton Hotel on Bermuda, and head of business development for Marsh Management Services, speaking to Captive International on the last day of the event.

Parrish said he was pleased with the way the three-day event had gone. It attracted a record 845 registered delegates including a large number of women. The overall theme of the event was diversity and he said he was delighted to see a number of all-female panels take place during the event.

But beyond the official theme, he said the overarching topic of the event which infiltrated most sessions was one of innovation: captive owners are doing more with their captives and are becoming increasingly sophisticated in the risk they are willing to manage using them.

“It has been a very positive event overall. Captives always seem to be facing challenges; people said Solvency II would be the deathbed of them at one point. But they continue to thrive and develop and become ever-more sophisticated,” Parrish said.

“I think in terms of absolute numbers the industry is reaching a plateau now – in Bermuda anyway. We will not again see the rate of formations we did in the 80s and 90s because most sophisticated companies already have a captive. We still have more than 750 captives but it is not a numbers game any more for this industry – what they are doing and the extent to which they are helping companies manage risk is growing all the time.”

He said a growing number of risks are being handled by captives, ranging from cyber to terrorism to environmental risks. Meanwhile, the industry is also looking at how it can embrace technologies such as blockchain and other forms of insurtech. “The new entrants look at this in a different way,” he said.

He said that as a business development manager, his role has changed to reflect this. “I used to help companies form captives; that was what business development meant back then. Now, it is far more about working with existing clients to explore how they can innovate and get more value from their captive. We are exploring new ideas and structures all the time.”