Europe’s captive market set to grow: AM Best

Competition between jurisdictions and a continuing hard insurance market look set to increase the number of captives operating in Europe, according to a recently published report. Analysis from ratings agency AM Best shows that of the number of captives domiciled in Europe, there were more captives licensed than closed in 2022 and this trend is likely to continue in 2023 based on the current numbers. In terms of domiciles, Guernsey issued 12 new licenses in 2022 and saw three captives closed, putting it at the top of the charts for European locations, followed by Luxembourg and the Isle of Man. Other established captive markets like Ireland and Switzerland saw modest increases in 2022, while the likes of Sweden, Malta and Gibraltar remained flat. However, the big development in Europe’s captives market has been the efforts of large onshore markets to lure captives to their shores. For example, France has one of the highest numbers of corporates with captives but these have tended to be based in overseas domiciles. Thanks to the introduction of legislation designed to make it easier to establish a captive domestically, France has approved the launch of 13 captives since 2020. According to AM Best, this trend is expected to continue. Its report cites the finding of French risk management association Amrae that more than 50 French corporates intend to set up a captive in France in the short to medium term. In addition, there is also the possibility that more overseas companies will take the same steps, as evidenced by Germany’s HDI Global’s recent decision to base its alternative risk transfer business in Paris. AM Best also highlights the efforts of Italy and the UK to replicate France’s captives strategy. “The City of London is exploring adopting a captive insurance framework, as part of the London Market Group’s roadmap to improving the business environment for risk transfer in the UK,” states the report. “In Italy, the domestic risk management association Anra has been lobbying the insurance regulator to authorise and regulate captive insurers in the country,” continues the report. “It has been reported that in 2023, a couple of Italian-owned captives began the process of redomesticating back to Italy after negotiations with the regulator IVASS neared agreement.” The Market Segment report from AM Best also acknowledges the impact of hardening commercial insurance on the growth of the European captives market. “AM Best has observed an increase in the use of existing captives in response to the hardening market conditions, as owners seek optimal risk transfer solutions. Several captives have increased their participation on existing covers, as well as expanded into new lines of business as their parents have looked at increasing captive utilisation,” states the report. However, AM Best also describes a number of challenges facing captives as a result of the market conditions, the main one being a rise in reinsurance rates. “Many captives are highly dependent on reinsurance capacity to be able to offer the large limits required by their parent groups,” states the report. But the hard market has led to price increases even for those captives with good loss records. “While reinsurers’ results have improved in the first half of 2023, AM Best expects the 2024 reinsurance renewal to remain challenging, with reinsurers allocating their capacity cautiously and seeking further positive price increases, and adjustments to programmes,” concludes the report.

Europe’s captive market set to grow: AM Best

Want to read this article?

Read Next

Healthcare and flexible/hybrid working most valued benefits

Global data breaches double in 2023 driven by extortion and third-party software attacks

Social inflation set to continue driving US liability rates: AM Best

Zurich appoints Adriana Scherzinger group head of captives

Marsh McLennan achieves ‘Autism Confidence’ status

Healthcare and flexible/hybrid working most valued benefits

Global data breaches double in 2023 driven by extortion and third-party software attacks

Social inflation set to continue driving US liability rates: AM Best

Zurich appoints Adriana Scherzinger group head of captives

Marsh McLennan achieves ‘Autism Confidence’ status

Want to read this article?

Read Next

Healthcare and flexible/hybrid working most valued benefits

Global data breaches double in 2023 driven by extortion and third-party software attacks

Social inflation set to continue driving US liability rates: AM Best

Zurich appoints Adriana Scherzinger group head of captives

Marsh McLennan achieves ‘Autism Confidence’ status

Related Articles