French firms share captive benefits as interest grows

French risk managers have stressed that their captives offer a range of benefits from boosting risk prevention and spreading the risk gospel across organisations, to managing emerging threats that insurers won’t touch. Speaking at the first France Captive Forum, which recently took place in Paris, companies that already have captives in France shared their experiences with others thinking of making the same move. Almost 200 people attended the event, which was organised by FFCE, a captive trade body sponsored by risk management association Amrae. They heard that captives have proven their worth in the recent hard market and are an extremely useful long-term risk management tool. Anne-Claire Pechoux-Lokoto, head of insurance at cookware firm SEB, told the audience that her firm decided to set up its captive back in 2021, in the midst of a very hard market. The decision was taken even before the approval of new tax and accounting rules in France last year, which has since triggered a wave of French-domiciled captives. “The captive has enabled us to talk about risks in a new way with the finance department and members of the board who were not necessarily implicated in the project from the beginning,” Pechoux-Lokoto said during a panel debate at the forum. “It also throws more light on discussion with the insurance market.” The case of Avril Re, the captive owned by the eponymously named agro-industrial group, is similar. It was created before the new rules came into force because of difficulties facing the food sector to transfer certain risks to the insurance market. Head of insurance and litigation at the firm Clarisse Billot said the captive’s long-term goal is to boost risk management across the group. “We wanted to step on the gas in risk prevention and have much stronger risk management practices within the group,” she pointed out. Both stressed that captives must be seen as a strategic tool. Billot pointed out that captives are key to managing a growing set of emerging risks. During the same panel debate, Julien Guenot, regional manager of southern Europe at AXA XL, said that some captive owners are already using their retention vehicles to deal with new exposures created by risks such as climate change and the energy transition. “The captive contributes to companies’ ESG strategies,” he said. One example was provided by energy group Veolia, which has had a French-based captive for 23 years. In a keynote speech, Helman le Pas de Sécheval, a member of Veolia’s executive board, noted that its captive Vesre offers the group flexibility to find solutions that insurers are not willing to offer. “It enables us to quickly adapt our coverage to the evolution of our needs and our risk profile,” he said. But it also helps the company prepare for the future. Since 2018, Vesre has had a prevention committee that, in addition to making sure the captive complies with regulations, discusses ways it can be used to tackle new risks. “[The prevention committee] deals with emerging risks, anticipating future challenges and preparing the company to face them,” Le Pas de Sécheval said. “It is also interested in the stakes linked to adapting to climate change, a major issue for our industry.” He explained that Veolia’s captive is integrated within the group’s “unique approach” to risk management, which is based on three pillars, the first being a strong focus on prevention. “That philosophy impregnates every single aspect of our operation, from employee formation to the planning of our facilities,” Le Pas de Sécheval said. “Our goal is to make prevention and risk management a competitive advantage in our tender applications. Is there a better dashboard for operational excellence than a captive?” The captive is also key for the second pillar of Veolia’s risk management strategy – high retentions for its insurance programmes. And it helps with the third pillar of structuring centralised global insurance programmes. “Those programmes, which are carefully conceived and implemented at the group level, allow us to optimise our insurance coverage for a better diversification of geographies and business lines, at the same time that we ensure a uniform and coherent approach to all our operations around the world,” he said. Le Pas de Sécheval added that Vesre is at the heart of Veolia’s insurance strategy and permits the company to avoid the volatility of traditional insurance markets. He also stressed that the captive’s success is the result of the commitment from Veolia’s leadership. This guarantees that all parts of the company that transfers its risk via the vehicle are engaged. “It is to some extent as if France’s large insurance companies had boards composed by clients, underwriters, risk managers, reinsurance underwriters and asset managers,” he said. “The synergies between the different functions is of essence.”

French firms share captive benefits as interest grows

Experienced captive owners were positive about the risk management tool

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