Enel confirms first onshore captive in Italy

Enel, the Italian manufacturer and distributor of gas and electricity, has confirmed that it is the first Italian corporation to create a captive at home in Italy.

The group told Commercial Risk Europe that its existing Netherlands-based captive Enel Insurance NV will be merged into the new Italian reinsurance captive on 1 January 2024.

A spokesperson for the company said that the new captive will write the same lines as the existing Dutch captive, including property damage, business interruption and casualty.

During Commercial Risk’s recently published annual Risk Frontiers Europe survey, leading members of the Italian risk and insurance management association Anra said that big Italian firms are very interested in captive rule changes. This follows the success of French association Amrae in persuading the French treasury to amend its rules to make the creation and re-domiciliation of captives onshore in France more attractive.

The Enel spokesperson said that no specific regulatory or fiscal changes have been made by the Italian government or insurance supervisor Ivass to make the formation of captives more attractive in Italy, but added that the coming reform of Solvency II should help.

The European Insurance and Occupational Pensions Authority (Eiopa) has explicitly stated that it wants to see national insurance supervisors apply the principle of proportionality more widely to captives that only write parent company business. This would reduce the capital and reporting requirements for captive owners.

It seems that Ivass has heard this message and opened the door to new captive formations “onshore” in Italy as further applications have already been made.

“Naturally, industrial groups should be allowed to position their risk management tools [including captives] in the same country in which they are domiciled, both for efficiency and organisational reasons,” the Enel spokesperson told Commercial Risk Europe.

“There have not been significant changes in the rules thus far, but this could be a sign of the harmonisation resulting from the Solvency II directive… we expect to have others [captives] to follow. Some have already filed,” added the spokesperson.

The European onshore captive movement really seems to be gathering pace following the success of the French effort.

UK risk and insurance management association Airmic this week welcomed news that its government plans to create a new onshore captive-friendly regime. Airmic is ready to work with members, regulators and the risk transfer industry to help ensure any legislation comes up to the mark.

The UK government announced during its recent Autumn budget statement that it will consult on introducing a new UK regime for captive insurance companies.

“The government will consult on the design of a new framework for encouraging the establishment and growth of captive insurance companies in the UK. The consultation will launch in Spring 2024,” it said.

Airmic told Commercial Risk that it is pleased by the news and is more than ready to play its part to move things forward.

“Airmic welcomes the commitment from government to hold a consultation in 2024 concerning the introduction of a captive regulatory regime in the United Kingdom.”

“We look forward to working with the government, regulators and the wider insurance community to ensure any proposed captive legislation is fit for purpose and supervises captives proportionately in a risk-based solvency regime,” said the association’s CEO, Julia Graham.

Airmic will no doubt have an important role to play. As Graham pointed out, it represents, and is in touch with, a wide range of captive owners that use established captive domiciles around the world through its Captive Special Interest Group.

“We will work to collect their views on what a good UK captive domicile should look like,” said Graham.

Spanish risk managers are also keen to see progress in the captive field.

In March this year, risk management associations Igrea and Agers launched a handbook to help Spanish companies better understand risk retention in light of the recent hard market.

Igrea president Daniel San Millán said that a Spanish legislative initiative similar to the one implemented in France could give the process a boost.

“We would love to see specific legislation about captive companies implemented in Spain too. Today, we are told that it is possible to set up a captive in Spain under the existing legislation, but the rules do not follow proportionality principles. The same rules that are applied to captives are applied to reinsurers,” he said.

“So it would be great if the legislation was reviewed in Spain, that some kind of specific rules were created for captives. It would be very interesting for the country that all the universe around captive companies were integrated into the Spanish market,” added San Millán.

“It is not a tax issue, it is a proportionality and accounting issue, and one that is also about how a company is allowed to build the stabilisation [or equalisation] reserve. The stabilisation reserve in Luxembourg, for example, is of the essence. Once the captive is capitalised, one can be bold. The company can then decide whether it will retain more risks or transfer to the captive more lines of risks,” continued Igrea’s president.

Given the positive news from Italy, it is likely that Igrea will seek to open discussions with the Spanish supervisor DGS to see how it will apply the proportionality principle under the revised Solvency II directive.