Captive interest soars in Asia

Interest in captives has exploded in Asia, with Chinese companies being a particular driver.

This is according to Willis in its latest natural resources market review, which explained that Chinese enterprises are embracing the captive proposition as a solution to the challenges faced by rapid investment in assets outside China and the desire to consolidate insurance purchasing.

“The captive is an effective tool to capture key management information to enable the creation of an optimum risk financing strategy, one which incorporates the most cost efficient balance of retained/transferred risk and supports both centralised decision making and the insurance purchasing process,” said Willis.

Willis said that a number of newly-formed energy company captives in the region are not actually retaining any risk initially but acting as a conduit to the markets whilst collecting this key data for future analysis.

The report added that although numbers for captive growth for 2014 were not yet available, Willis’ best estimate was that captives worldwide will increase past 6,700, representing a 6 percent increase. As at year end 2013 there were 6,342 captives recorded worldwide, an increase of 4 percent on the previous year.

“The vast majority of this growth has occurred in US whilst the more traditional captive centers such as Bermuda, Cayman Islands and Guernsey have shown nil net growth despite a number of new formations as mature captives have been would up or merged,” said the report.