Innovation and new frameworks are driving growing use of captives
Captive insurance is steadily shedding any perception of being an opaque risk-transfer instrument reserved for multinationals and is instead being recognised as a legitimate, strategic tool in the risk financing arsenal.
That’s the view of Franck Baron, president of IFRIMA (International Federation of Risk and Insurance Management Associations), who also serves as chief risk officer at International SOS, a health security company.
Speaking to AIRMIC Today about the evolving role of captives, Baron highlighted the sector’s growing momentum globally, especially as more jurisdictions introduce onshore captive frameworks.
“We’re seeing development of onshore regulation like in France, the UK is contemplating similar moves, and Spain and Italy are also active,” said Baron. “More and more CFOs are increasingly convinced it’s a strategic risk financing tool – not some exotic and technical entity tucked away dealing with legacy insurance matters.”
According to Baron, there are currently around 7,000 captives worldwide, but still ample room for growth. “There is a lot of work to be done to expand this tool to other organisations,” he said. “In many domiciles different techniques and approaches can make it palatable to less sophisticated or smaller companies. Captives are more affordable and accessible than many think.”
Baron underscored that many organisations still fail to leverage the full potential of their captives, in part due to a lack of internal collaboration. “Only 200 captives globally manage employee benefits out of 7,000. That tells you something,” he noted. “Risk managers and captive owners are facing difficulties being properly cross-functional and reaching out to internal stakeholders, like HR or compensation and benefits. This is a real barrier to expanding the role of captives.”
Under-connected to ERM
Despite their strategic potential, many captives are still isolated from their parent company’s broader enterprise risk management (ERM) programmes. “Many captives are not connected to the ERM framework,” Baron noted. “Even when parent companies are increasingly aware of their top risks, I do not see this insight translating into action: does it fit the captive’s risk appetite? Can the captive play a role in absorbing or managing this exposure?”
This disconnect limits the strategic use of captives. “If the organisation has new risks emerging, we need to ask: how can the captive help?” Baron said. “We need strong underwriting guidelines and governance, but also the agility to adapt to the company’s evolving risk appetite.”
Baron also spoke from the perspective of International SOS, where the captive is embedded within the corporate finance and legal functions. “People can see it, talk to the team – it’s visible. That visibility helps to grow understanding and reduce misconceptions,” he said. “Captives are now being seen less as mysterious offshore vehicles and more as legitimate, practical tools.”
Indeed, he believes this growing visibility is key to shifting perception. “There is definitely momentum. Captives are becoming another tool in the toolbox – understandable, practical, and relevant to specific circumstances.”
Captives and sustainable finance
Baron also revealed IFRIMA’s active collaboration with the UN to promote captives as part of sustainable finance. “We’re finalising a joint declaration with the UN to highlight the role captives can play in supporting sustainability goals,” he said. “The idea is to reach beyond our captive expert community and speak to business and financial leaders using the UN brand and network.”
Baron pointed to the UN’s Principles for Sustainable Insurance under the UNEP FI initiative, which currently has 350 financial institution signatories – but only four are captives. “Only four captives are committed to these sustainability principles. Ours is one of them, alongside a few in France and Italy. That tells you how much work is still needed.”
He sees an untapped opportunity for captives to support sustainability initiatives through co-financing risk management and prevention projects. “The captive can act as a kind of business angel for risk management-related investments – from property risk engineering to sustainability-related risks,” Baron said.
Despite progress, Baron is clear: the industry still has ground to cover. “Yes, there’s growing momentum, and captives are better understood than they used to be, but we’re not done. There’s still work to do,” he emphasised.
That work includes improving captive literacy among owners, integrating captives more fully with ERM strategies, and building internal collaboration. “Many captives are managed externally, and some owners don’t fully understand the financial and regulatory mechanics,” Baron added. “That’s a missed opportunity.”
Looking ahead, Baron sees promise – especially as organisations begin to align their captives with broader corporate priorities. “If we can connect captives more deeply to the pulse of the organisation – new risks, sustainability goals, internal collaboration – we’ll unlock much more value,” he said.
The upcoming joint declaration with the UN, expected to be released in the coming weeks, aims to serve as a catalyst for that transformation. For Baron, it’s about putting captives where they belong: at the heart of enterprise risk and financial strategy.
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