30 September 2016EMEA analysis

Producer owned reinsurance companies are the major area of growth in the captive market

Growth in the captive insurance market will be driven by intermediaries and brokers establishing vehicles to aggregate the risks of their individual customers, it has been claimed by a panellist at the Guernsey Insurance Forum.

The vehicles, sometimes referred to as producer owned reinsurance companies (PORCs) or producer owned insurance companies (POICs), are seen as an alternative form of capital used by promoters to support their client’s niche insurance needs.

PORCs enable customers who, in their own right may be too small to go down the captive or protected cell company (PCC) route, to be grouped together into a larger programme in order to enjoy the benefits of the captive and reinsurance markets, said Oliver Schofield, executive director at RKH Reinsurance Broking at the forum.

“It allows smaller organisations to access those underwriting profits, rather than seeing those profits perhaps just disappearing into the re/insurance world,” said Schofield.

“It also allows those producers, those brokers, to drive alternative solutions into their client base, rather than perhaps some of the more esoteric alternative solutions being the domain of the larger buyer. They suddenly become much more available to the small and very small organisations that are buying their insurance now. It also allows those brokers to drive risk management into the core of each of those individual customers.”

Schofield made the point that while captives would continue to be used by the ‘usual entities’, those organisations he described as being around for a long time, such as corporate entities, affinity groups, associations and trade bodies, it was smaller firms utilising PORCs who would drive innovation in the sector.

Fellow panellist, Mark Helya of Bedell Cristin, a Guernsey-based lawyer who specialises in re/insurance and insurance-linked securities, agreed. He said he was seeing a number of organisations going down the PORC route.

“PORCs are the major area of growth in the captive sector at the moment. All of the Coca-Colas of this world, the BPs and the Shells and everybody, have got their captives already, so if you want to get into another sector, then it needs to be in SMEs,” Helyar added.