Onshore European domiciles aiming to grow
France, Italy and the United Kingdom are developing captive insurance regimes to enable businesses to improve their risk management and to get risk financing, panellists told a conference today.
Delegates at the Airmic Captives Forum held at Lloyd’s of London were told that the genesis of the development of the captive sector in France had taken place in the wake of the rise of cyber risk which created a new risk landscape.
In Italy, the development of a captive regime began when several Italian companies wanted to redomicile their captives in the country.
And the UK insurance industry is pushing to develop a captive insurance industry in part because it will round out London’s offering as one of the world’s leading risk capitals.
Brigitte Bouquot, the former president of the French Risk Management association AMRAE, said at the panel, entitled Captives going mainstream, that the drive to set up the captive regime was partly driven by the Covid-19 pandemic, partly because many French companies had captives in Vermont or Luxembourg and as a means of expanding risk financing.
She said one of the biggest challenges was convincing the Ministry of Finance and the tax authorities that captive insurers were not set up for “tax optimisation” but as a means of risk management.
She said it had taken five years to get the regime up and running, but it was beginning work, with 16 captive insurers now established in the country. She said the energy sector was a main driver of the formations.
Carlo Cosimi, the president of ANRA, the Italian risk management association, said the Italian regime was less developed than France’s, and did not have specific legislation for captive insurers.
Instead, he said, two Italian companies wanted to redomicile their captives to Italy and had received modified reinsurer licences in order to do so.
He said Italy still lacked a stable captive regime.
He said the interest in captives was driven by the same factors as anywhere else – by businesses struggling with high prices and exclusions from traditional carriers and their benefits had become more obvious as risk managers came to have more influence in companies C-suites.
Caroline Wagstaff, chief executive officer of the London Market Group, said the UK’s captive regime was still “right at the beginning”.
The desire to establish a captive regime was partly driven after Brexit as the insurance industry recognised the need to continue to diversify, but also because London is already a leading insurance sector and needed to be able to offer clients all the tools available.
She said a consultation on captives was due to start this spring after the UK Treasury included starting a captive industry in the Autumn Statement.
Asked by moderator Paul Eaton, CEO of Artex International, to describe the challenges for their respective captive sectors, the panellists all emphasised the need for a dedicated regulator who recognised the principle of proportionality, since few captive insurers could mee the requirements of Solvency II, with Cosimo saying an Italian captive would need 10 compliance employees for each underwriter.
Bouquot said many of the companies considering forming captives in France were family-owned businesses whose activities were primarily centred in the country and who therefore had not interest in an offshore domicile.
“I am alive to the fact that the UK needs legislation and a willing regulator,” Wagstaff said.
Asked by Eaton to say where they thought their respective captive regimes would be in five years, Bouquot said she believed there would be collaboration between the different countries.
Wagstaff said she believed the UK would have a captive regime in five years, and noted regulators were now required to show how they were helping the industries they regulated to grow, which she said would help to create the sector.
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