Captive news

Aon launches captive benchmarking survey Aon Global Risk Consulting has launched its 2014 Captive Benchmarking Tool, which has highlighted the limited number of captive owners currently writing cyber in their captive. The 2014 Captive Benchmarking Tool included data from over 1000 Aon managed captive clients and showed that only 1% of captive owners currently write cyber-a figure that has remained static since 2012. Aon said this was surprising given its 2014 Underrated Threats Report where 83% percent of captive directors felt that the ranking of 18 for cyber risk was severely underrated. Vincent Barrett, Managing Director, Aon Captive & Insurance Management, said: "With the increasing risk of cyber attacks we were surprised that such a looming and potential source of liability was only being written into a captive by 1% of captive owners. The reluctance for many organisations appears to derive from the challenge of estimating cyber risk exposure and understanding the consequences of cyber events-a challenge equally reflected in the reluctance of companies to purchase cyber insurance."hideThe report concluded: "The low level of cyber in captives appears to align with a lack of clarity of the cyber risk exposure and quantification of consequences of cyber events, a challenge equally reflected in the reluctance of organisations to purchase cyber insurance from the insurance market. It is clear that the insurance markets also have more to do to understand cyber risk and offer insurance policies that will provide the correct protection." It added: "However, only the ability of an organisation to articulate their own risk profile to support better submissions to underwriters can truly drive this objective. A captive does not provide all of the answers but does offer a focal point to gain clarity of this risk, with the strengthened claims and exposure data and market knowledge enabling the implementation of an optimum cyber risk transfer structure." Rated US captive insurers outperform commercial sector US captive insurers rated by AM Best continue to outperform the commercial sector in every key financial measure, according to the rating agency. AM Best noted that in 2013 there was a 12.4-point improvement in the loss and loss-adjustment expense ratio over the prior year, mainly due to the lack of any major, outsize property losses (the 2012 results were driven largely by Superstorm Sandy). AM Best said that underwriting expenses improved to a five-year low in 2013. "Over the longer term, the five-year average combined ratio for the captive composite of 85.2 continues to compare extremely favourably with the commercial composite's average of 103.2. The captives' operating ratio over the same five-year period is tighter, with the captives generating a five-year operating ratio of 69.7 versus 88.3 for the commercial composite," said AM Best. London & Capital launches Captive Indices London-based wealth manager London & Capital has launched a suite of proprietary indices for captive insurers. London & Capital said its Captive Indices examine the long-term trend of three typical asset allocations across a ten-year cycle. It said that for the first time captive insurers have a point of reference to benchmark the performance of their investment strategies. The Indices will be published every quarter with an in-depth analysis available by London & Capital on an annual basis. "The Indices help to de-mystify financial markets and have been optimised to suit the investment needs of three predominant profiles among captive insurers: these are labelled as Index 1, 2 and 3," said London & Capital. It explained that Index 1 is for captive insurers with a high frequency, low severity claims pattern, pursuing a conservative investment strategy. Index 2 is for captive insurers with less immediate cash-flow requirements for claims, and which are pursuing a balanced investment strategy. Index 3 is for captive insurers that can withstand short-term market volatility, as they are looking to fund long-term liabilities. William Dalziel, Head of Institutional Clients at London & Capital said, "We know captive insurance companies are unique. They are all 'special cases' in terms of risk profile and each has a specific range of liabilities to meet through its chosen investment strategy. Our Indices will serve as an important benchmarking tool for captives, showing them very clearly where their investment performance stands against an optimised portfolio that's appropriate for their investment objectives." High risk country list removed from FCA website The Financial Conduct Authority, which regulates the UK's financial services industry, has removed its list of 'High Risk Countries' from its website and said that it does not plan to publish such a list in the future, following representations from the Cayman Islands Government. It also has committed to a full review of the methodology that resulted in the Cayman Islands being placed on the list, said the Cayman Islands Government. 'Government has been in continuing correspondence with the FCA regarding the list since our first letter of 8 July, and we recently sent correspondence to the UK Treasury, and the Foreign and Commonwealth Office, on this matter as well,' said Minister of Financial Services, Wayne Panton. "Our industry regulator, the Cayman Islands Monetary Authority, will continue the dialogue with FCA officials to ensure they are accurately informed about our regime," he added. He pointed out that Cayman and the UK rated equally in the OECD's 2013 Global Forum on Transparency and Exchange of Information for Tax Purposes rankings, and in the Global Forum's assessment, Cayman's rating was higher than most of the G8 countries. Fitch report on NAIC requirements for captives New requirements proposed by the National Association of Insurance Commissioners (NAIC) to subject corporate captive insurers to full NAIC accreditation standards could materially increase costs for these captives, and could lead to disclosure of information that the captive's parent views as competitively sensitive. This is according to a new report from Fitch Ratings, which added that this could lead such captive arrangements to be moved offshore, which could have the unintended consequence of weakening, rather than strengthening, captive regulation and disclosure. Fitch said it believes the recent proposal stems from an ongoing controversy over the use of captive life reinsurers for life insurance reserve financing. Some key states, most notably New York, have deep concerns with the use of captive insurers for this purpose. The NAIC recently proposed new accreditation standards that would require certain captives to comply with the accounting and disclosure rules for traditional insurance companies. "Read literally, the NAIC proposal would apply not only to captive life reinsurers, but also potentially to other captives including traditional corporate-sponsored captives," said Fitch. The rating agency said it has found it difficult to ascertain if the regulatory intent is truly to include traditional corporate-sponsored captives, or if the current wording in the regulation simply needs to be tightened up. Fitch urged the NAIC to clarify its position. XL appoints Head of Captive Programmes XL Group has appointed Matthew Latham as Head of Captive Programmes. He will be based in London and will report to Gavin Bruce-Smythe, Chief Underwriting Officer, International Property & Casualty. He will initially focus on UK and continental Europe, providing a focal point for all captive insurance arrangements. He joins XL Group from AIG where he spent nine years, most recently leading the UK client management team looking after AIG's largest UK clients. Before that he headed the alternative risk financing team. Jason Harris, Chief Executive, International Property & Casualty at XL Group, said: "The risk landscape is changing and captive owners are looking at more innovative ways of using these vehicles in response to new and evolving risks. A dedicated expert resource focusing on captive programmes will ensure clients and brokers get the best possible captive-related solutions and services from XL."

Captive news

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