11 September 2019Analysis

Marsh-JLT merger unsettles Bermuda captives

Steven Crabb, CEO at Davies Insurance Services, believes the recent merger between Marsh and JLT is an opportunity for his company to pick up business from disaffected captives.

“Both are big captive managers in Bermuda,” said Crabb. “But Marsh has clients who chose it because they didn’t want to be with JLT, and JLT has clients who chose it because they didn’t want to be with Marsh. For them, this merger is a problem.”

Quest, a captive servicing company with offices in Bermuda and Vermont which Davies Group acquired in January 2018, sees this as an opportunity to grow the business, said Crabb. There is a particular opportunity among smaller or medium size companies, he added.

Beyond that, Crabb sees growth potential more generally among medium sized companies. Most S&P companies already have a captive, but there is plenty of room for growth among companies too small for the index that do not yet have a captive.

Organisations like nursing homes, dentists and doctors have been among the early converts to captive insurance because it allows them to smooth out their insurance payments. Liability classes provided by commercial providers can be subjected to sudden rate changes, but this does not happen with captives, where premiums are repatriated to the parent group.

But outside of these areas there is huge growth potential, and Crabb believes the rent-a-captive model is perfect for them. Using a third party captive gives them the expertise of a group that has experience of running an insurance company, which captive owners typically do not have, he added.

There is also room for growth outside the US. Quest is particularly focused on London, with Davies’ office in the city giving it a toe-hold in that market.

“We are trying to reach out to UK SMEs,” he said. “The regulatory regimes for captives in Guernsey and Malta are very similar to what we have in Bermuda.”

He admitted it might be a harder sell in the UK, where the tax advantages of captives are not as great as they are in the US, but there is still a strong case to be made for captive insurance.