Asia captive domiciles set to grow: AM Best

Captive insurance domiciles in Asia are set to thrive as risk management strategies mature in the region, an AM Best report suggests.

According to the ratings agency, there is an estimated 6,337 captives worldwide. Around 2.8 percent of this figure is domiciled in Asia-Pacific.

AM Best expects to see significant growth in the Asia-Pacific domiciles, in particular Singapore, Labuan and Hong Kong.

Singapore currently leads in the region with 72 captives domiciled there. The Monetary Authority of Singapore (MAS) has introduced efforts over the years to attract more captives to the city-state.

Captives in Singapore are predominantly single-parent, set up to re/insure the risk of the parent and its related companies. AM Best suggested these are formed mostly by Australian companies, followed by New Zealand, Japan, Thailand, the Philippines and Mexico. Furthermore, they mainly underwrite property damage, business interruption and general liability.

Labuan currently has 48 captives, with parents comprised mainly of large corporations and SMEs from Australia, Singapore and Malaysia.

While Singapore is generally quite restrictive when it comes to captives writing third-party risk, Labuan is more open to this, the report highlighted.

Hong Kong, while being a well established financial services hub, is lagging behind its peers in the region as a captive domicile, AM Best said.

Currently, Hong Kong only has four captives domiciled there, which are set up by state-owned energy groups.

Hong Kong's government is, however, committed to increasing the number of captives domiciled there, offering tax incentives. It also features considerably lower capital requirements, a friendly regulatory environment and a common law legal system, which AM Best says make it a more attractive domicile than China.