Aon reports increasing sophistication of Asian captives

Captive owners in Asia are showing an unprecedented level of sophistication and increasing their captives’ involvement in non-traditional lines, according to Aon.

In its Asia Market Review 2017, Aon said the Asian captive market has continued to grow at a steady pace through 2016, and while Aon’s captive clients have continued to write traditional lines such as property and liability risks, the broker is also seeing a growing number of clients seeking to increase participation in non-traditional lines such as cyber risk, environmental liability, trade credit and employee benefits.

Aon said it is “currently experiencing an unprecedented level of sophistication amongst captive owners in the region, the majority of which are gross line captives seeking to manage and control external risk transfer costs as well as group retention costs, taking a total cost of insurable risk (TCOIR) approach to risk-related decision making.”

It continued: “With the insurance market approaching the bottom of the cycle, captive owners continue to aim to reduce TCOIR, with an increasing emphasis on analytics, risk improvement and loss management in order to achieve TCOIR objectives.”

Aon said it foresees continued growth in the formation of captives in the region, and is increasingly seeing captives used as a tool to control volatility, incubate or introduce new risks, and to increase the price competitiveness of their overall programme.

The largest domicile in the region, in terms of number of captives, is

Singapore (71 captives), followed by Labuan (40) Micronesia (18) and Hong Kong (3).

Aon noted that the Monetary Authority of Singapore recently introduced Organisation for Economic Co-operation and Development (OECD) minimum base erosion and profit shifting (BEPS) standards, and will withdraw its tax exemption on 31 March 2018 to comply with OECD guidelines in relation to economic activity, substance, and arm’s-length commercial arrangements.

“We believe this is a positive step for Singapore as it will continue to remain a competitive and reputable option to the growing number of multinational organisations using Singapore as the gateway to Asian or international services and markets,” said Aon.

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