Maxwell: UK regime can strengthen captives’ role in a changing risk landscape
The changing nature of risk is forcing organisations to reconsider how risk management contributes to business growth, while creating new opportunities for captives as companies seek more holistic approaches to risk tranfer.
Key Points:
Captives gain ground as risks evolve
UK regime must enable re-domiciliation
AI demands disciplined governance
That’s the view of Diane Maxwell, chief executive of Airmic, who was speaking with FERMA Forum Today.
Six months into her tenure, Maxwell says conversations with Airmic members have reinforced the importance of demonstrating the value of risk management within organisations. Members are under pressure to show that risk supports growth, rather than being viewed simply as a cost centre or a barrier to new initiatives.
For Maxwell, that challenge goes to the heart of how risk is positioned within an organisation, including its place in the hierarchy, decision-making chain and development of business strategy. She says understanding and highlighting the value of risk management will feature heavily in Airmic’s future work programme.
Changing risk
The changing risk environment also strengthens the case for captives, particularly as businesses confront risks that can no longer be neatly separated into individual categories.
Maxwell points to increasing interconnectedness, where an incident can trigger contagion or cascading effects across a network of interdependencies within a business and beyond it. Traditional insurance arrangements, which can address primary risks discretely, might not always reflect the way those risks materialise.
“The UK is well placed to offer a competitive regime to anyone who is jurisdiction shopping”
That can create protection gaps and, Maxwell argues, highlights the need for a better understanding of how insurance products can respond to businesses’ changing risk profiles.
Captives can form part of that broader approach by giving organisations another mechanism for risk transfer as they consider their overall exposures. The UK’s proposed captive regime is therefore an important development, with Maxwell arguing that Britain has several advantages for organisations considering where to establish or relocate captive operations.
“The UK is well placed to offer a competitive regime to anyone who is jurisdiction shopping,” she says, pointing to an engaged regulator and the capacity and capability of ancillary support services, including independent non-executive directors where required.
However, Maxwell believes the details of the regime will be critical to its long-term competitiveness. In particular, she highlights the importance of a smooth re-domiciliation process, which she says is in train but could still be 18 to 24 months away.
She also hopes the regime will eventually include protected cell companies. For smaller organisations and first-time captive owners, she says, PCCs could provide a lower-cost entry point, making them an important addition to the UK framework.
Growth of captives
Maxwell believes the development of captives should not be viewed separately from wider changes in the relationship between risk managers, brokers and insurers.
As risk managers become increasingly involved in geopolitics, supply chains, AI and corporate resilience, she says the insurance industry will need to understand clients’ businesses more deeply and develop solutions that address risks holistically.
“Brokers and insurers will need to get closer to clients, do a lot of listening, understand their business and propose product solutions that provide a holistic approach to avoid protection gaps,” Maxwell said.
The requirement will differ across Airmic’s membership according to sector and individual circumstances, but Maxwell expects risk consulting to become increasingly important as organisations seek help navigating complex combinations of exposures.
That approach could also influence how companies use captives, with captive structures potentially forming one element of a broader risk financing strategy rather than operating in isolation.
AI presents another example of why risk management needs to adapt. Maxwell describes the technology as a double-edged sword, offering the prospect of greater productivity while creating new avenues for cyber risk.
One of the biggest challenges, she says, is knowing where and how AI is being used across an organisation. Rather than treating it solely as a problem, businesses should embrace it as a tool while ensuring that implementation is governed consistently.
“The quicker the implementation of AI can be systemised with the right policies and governance the better,” she said. Once AI is embedded, organisations should maintain a disciplined approach so that its use remains within agreed guidelines and the risk of rogue activity in “the dark corners” is reduced.
For captives, Maxwell sees collaboration as particularly important. She wants Airmic’s relationship with Guernsey’s risk, insurance and captive community to strengthen, with the two communities sharing ideas about governance, regulation and innovation.
The emergence of the UK regime could create “brief moments of tension”, she acknowledges, but says the wider captive community can manage those differences in the interests of growing the global captives market and increasing awareness of captives as a mechanism for risk transfer.
Ultimately, Maxwell’s priorities return to Airmic’s members. By the end of her first full year, she wants them to feel genuinely heard and supported, with Airmic’s work demonstrably starting from their needs.
For her, that member focus provides the direction for an organisation navigating a risk landscape in which interconnected exposures, AI and alternative risk transfer are increasingly difficult to separate.
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