22 November 2021

SCOR captives study showed mixed fortunes

According to a  new study by SCOR, European captives’ business growth is accelerating. The reinsurer’s survey of captives finds that gross written premium grew by 3.2% in 2018 and 2019 and 4.8% between 2019 and 2020.

The study provides a quantitative overview of European captives owned by large industrial and commercial companies. Of 300 reviewed, it includes 187 that met its criteria: That they belong to an identifiable industrial or commercial company, write P&C risk and release a solvency and financial condition report (SFCR).

Almost two thirds (62%) of the captives were domiciled in Luxembourg, with over a quarter (27%) in Ireland. Together, the two domiciles account for 84% of the €4.4bn GWP reported for the most recent year and 83% of reported assets. Others were based in Sweden, Malta, Norway, the Netherlands, Germany and Gibraltar. Other findings include the fact that US-based groups were more likely to locate their European captives in Ireland (91%), while groups based in Belgium (100%), Spain (83%) and France (80%) primarily domiciled captives in Luxembourg.

The survey found that the top one per cent of the captives accounted for ten per cent of the premium – which is as much as the bottom 58% combined.

Property business was the most frequently written, with 72% of the captives offering cover. Liability business was second, written by 60%, while motor was the least common line, written by only 13%. Captives write a wide variety of risks, however, with miscellaneous financial loss (MFL) – “any other risk of non-Life insurance not covered by the [other regulatory] lines of business” is reported by 47%, including 59% of those domiciled in Luxembourg. Almost a quarter (23%) only write one line of business, most commonly MFL (9%), followed by property (7%).

The distribution of the loss ratio of the captives surveyed was highly volatile, with one in five captives reporting a total loss ratio of zero or below and the same proportion reporting a total loss ratio of more than 100%. The highest loss ratio was more than 500%.

Total assets held by captives within the sample amounted to €23bn, with an average balance sheet size of €123 million.