The European captive insurance landscape is changing and growing fast
The captive insurance market in Europe is undergoing significant transformation, with regulatory shifts, increased corporate interest, and the emergence of new domiciles shaping its trajectory, according to a panel titled ‘Changes, Challenges and Opportunities in Europe’, which took place at the annual CICA conference, taking place this week in Tucson, Arizona.
Caroline Wagstaff, chief executive of the London Market Group, observed a notable surge in interest in captives across Europe. “You only need to look at France introducing a captive regime, Italy in their first captive, and Spain discussing potential changes. The UK is also evaluating its regulatory framework,” she explained. “What struck me is that something which was considered niche 20 years ago is now essential for businesses seeking risk transfer solutions.”
Udo Kappes, head of insurance at RWE, agreed with this, acknowledging both the growth and the regulatory hurdles. "It’s impressive to see the development in Europe, although since 2016, regulations have become significantly more complex. Relocating a captive is like creating a new one from scratch, with an immense amount of paperwork and coordination required," he said. "Despite these challenges, the market continues to expand, which is encouraging."
Nancy Gray, regional managing director – Americas at Aon, pointed to the stability of the European captive market while highlighting emerging opportunities. “Captive utilisation in the Americas is significantly higher than in EMEA, but Europe remains a stable, mature market with growing potential. France is a hot spot, and the UK is actively reviewing its captive regulations. Italy, however, still faces hurdles due to its stringent legislative framework,” she noted. “Europe’s captive market today reminds me of the expansion seen in the Americas about a decade ago.”
One of the primary challenges facing the European captive market is regulatory complexity. The introduction of the Solvency II framework has had a profound impact, and efforts continue to ensure proportionality in its application.
Kappes, who also serves as chairman of the European Captive Insurance and Reinsurance Owners Association, reflected on this evolution. “When Solvency II was first implemented, there was little recognition of the unique nature of captives compared to commercial insurers. The regulation was designed to protect consumers from insurer insolvencies, but captives exclusively serve their parent corporations. We’ve worked hard to ensure a more proportionate approach, and by 2026, we expect relief for small and non-complex entities, including captives.”
In the UK, Brexit has opened the door for regulatory adjustments. “One potential benefit of the UK leaving the EU is that we can now redefine solvency rules for captives,” said Wagstaff. “Currently, there’s no distinction between captives and commercial insurers, making it an unattractive option due to excessive regulatory burden. However, we’re actively engaging with the government to change this.”
The proliferation of captive domiciles across Europe reflects the evolving landscape. “One of the key drivers for new domiciles is compliance,” said Kappes. “Companies prefer to have their captives in their home country to avoid regulatory scrutiny and potential tax-related challenges. France’s recent regulatory developments are a prime example of governments recognising the value of captives in domestic risk management.”
Wagstaff highlighted practical considerations influencing domicile decisions. “There’s still a reputational risk associated with having a captive in a jurisdiction far from home. Some firms have moved their captives back to their home state despite it not being the optimal financial choice. Additionally, smaller firms that want to leverage captives may find an offshore solution too complex to manage,” she explained. “COVID-19 also reinforced the need for easier access, as travel restrictions made managing captives in distant locations a logistical nightmare.”
Andy Zoller, head of International – US Commercial Insurance at Zurich, underscored the overall market expansion. “Globally, 25% of the insurance market’s premium flows through captives, with 11% coming from Europe. The market isn’t just growing in terms of domiciles—it’s expanding in size and importance.”
Regulatory compliance remains an evolving challenge, with new requirements such as the Digital Operational Resilience Act (DORA) adding complexity. “DORA is designed to strengthen cybersecurity for financial institutions, but its application to captives raises questions,” said Kappes. “Captives operate within corporate risk frameworks and don’t interact with external customers in the same way commercial insurers do. Compliance with DORA adds yet another layer of regulatory burden.”
Ultimately, the European captive market is poised for continued evolution. While regulatory challenges persist, the growing recognition of captives’ strategic value, along with legislative efforts to refine proportionality, signals a promising future. “Choice is the key word here,” concluded Wagstaff. “With increasing options for domiciles and a broader acceptance of captives’ role in risk management, the market is only going to get stronger.”
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