Marsh expects ‘tremendous’ captive growth from China

The broker reports that, despite persistently soft global insurance markets, the captive market continues to grow as companies appreciate the cost and risk management benefits of the captive concept. “While insurance markets have changed drastically over the past 50 years, one of the few constants has been the steady growth of captives. Despite volatility in the financial sector, global economies and the emergence of new risks, captives continue to thrive, providing affirmation of their efficacy, flexibility, and stability,” stated Marsh in its latest annual Captive Benchmarking Report. “As business owners become aware of the benefits of captive insurance programs, the exploration of different possibilities in structures, domiciles and coverage can create an infinite number of opportunities for various types of companies. Once almost exclusive to the Fortune 500 and FTSE 100 companies, captives now can provide benefits to organisations of all sizes, industries and geographic orientations,” added Marsh, noting that the middle-market space will be a particularly active area for captive growth in the coming years.hideGeographically, Marsh has big hopes for the Asia Pacific region and China in particular. Currently, Asia Pacific-based companies account for a small proportion of the captives managed by Marsh. In its annual captive report, the group reported that it manages more than 1,240 captives globally. Some 1,109 of those captives took part in the report and they collectively generated premiums of $38.1bn. North American-domiciled companies dominate the captive market on a global basis. Of the 1,109 total number of captives managed by Marsh, 678 companies are based in North America. North American-domiciled companies paid $31bn of the $38.1bn total. The next biggest market for Marsh is Europe, the Middle East and Africa, with 315 companies domiciled in this region paying $5bn of premiums, according to Marsh. Some 56 of the companies managed by Marsh’s captive operation are based in the Asia Pacific region and generate some $528m in premiums. Of this total, some 40 companies are actually domiciled in the Asia Pacific region. Singapore is host to 31 of Marsh’s captives, which generated gross premiums of $385m. Labuan hosts four Marsh captives and generates some $63m in gross premiums. This clearly leaves much room for growth and Marsh believes that it will come. “Asia Pacific is becoming more expansive; therefore, we think Asia, in particular China, could be the next emerging market,” stated the broker in the report. “Non-US domiciles, such as Hong Kong, are slow to start with only three captives, but there is much talk about how pro-captive the Hong Kong regulators are. We think that this will open up opportunities for clients in Asia, especially in China where companies are testing the waters and using captives in the National Oil Companies space and for lines such as property and trade credit,” continued Marsh. Marsh reported that the Hong Kong captive regulator actually has a short-term goal to have more than 20 captives. It believes that it could see “tremendous” growth as a result, as Chinese companies form captives to gain access to reinsurance, property coverages and adopt a more disciplined risk management approach.

Marsh expects ‘tremendous’ captive growth from China

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