Captive interest rising in Germany despite BaFin’s strict approach
The GVNW is seeing a continued “strong interest” in captives among members and many are carrying out feasibility studies with a view to ideally basing their captive in Germany. But unlike in France, the supervisory and fiscal environment in Germany can still not be described as “captive friendly”, and there are few indicators from the regulator BaFin that this will change any time soon.
The European Insurance & Occupational Pensions Authority (Eiopa) has consistently supported the concept of proportional treatment of captives under Solvency II for some time. The French and, it now seems, the Italian national supervisors are clearly getting the message. But despite a positive discussion on the topic at last year’s GVNW Symposium involving BaFin, little formal progress appears to have been made in Germany.
Despite this, GVNW reports that its recently created dedicated captive committee is expanding on the back of rising interest from members. It has also tied up with a university to analyse how captives are treated by supervisors across the EU to help with its advocacy efforts with BaFin. GVNW members can only hope that the study is solid and convincing.
“We are witnessing continued strong interest in captives. A notable indicator of this trend is the ongoing expansion of our dedicated committee in this area. Our member companies benefit from receiving comprehensive information and insights into captives through our initiatives,” said the GVNW.
As in France and Italy over the last two years, it is clear there is growing demand for captives based at home. “Many firms are currently engaged in feasibility studies. A few of those, especially family-owned enterprises and those with state involvement, are showing a distinct preference for establishing captives in Germany,” reported the GVNW.
But the alleged “gold-plating” approach from BaFin to captive rules remains something of a barrier, said the association.
“Germany has not adopted captive-friendly rules such as France and Italy, and still has the reputation to interpret EU regulations stricter than many other member states, which presents challenges in setting up captives,” it said.
However, the GVNW will persist and is working on the study to back up its case. “As an association, we aim to address this issue proactively. Initially, we are collaborating with a university to analyse the factual variances across different captive domiciles within the EU,” it said.
“This research will help guide our advocacy efforts moving forward,” the association told Commercial Risk.
Another alternative risk transfer approach taken up increasingly by risk and insurance managers across Europe in recent times is parametric insurance. This market has received a welcome boost as the traditional insurance and reinsurance market backed away from catastrophe risks, prices spiralled and the parametric option became more attractive.
GVNW members reportedly like the concept, particularly the simplicity of the claims payment element, but cost remains a challenge, reports the GVNW.
“Parametrics represent a valuable complement to current risk financing instruments. While straightforward in principle, their implementation demands considerable deliberation and effort. It is crucial to bear in mind parametrics do not constitute a low-cost option for risk financing,” said the association.