New French captive rules significant step in market realignment, says AMRAE president

French risk management AMRAE will focus on the continued difficult state of the commercial insurance market, working closer with smaller firms to share its knowledge and more deeply embedding the principles of good risk management across a wider range of stakeholders at all levels this year, according to president Oliver Wild.

In interview with Commercial Risk in Paris ahead of the association’s annual conference in Deauville, Normandy from 1-3 February, Wild said that a key focus at the event and this year will be the state of the insurance market.

He said that we are entering a new phase and mode of risk-sharing, exemplified by the arrival of new measures by the French government to make it more attractive for French firms to locate captives and other self-insurance mechanisms at home.

This occurs at a time when French risk and insurance managers still find their renewals a challenge in core and more difficult lines such as cyber and property.

Wild also said that AMRAE needs to work more with smaller firms that do not have dedicated risk managers but must rise to the challenges thrown up by tough economic conditions and become more resilient. One roundtable at the AMRAE conference will focus on what tools and methods can be simplified for such firms.

AMRAE needs to focus on reaching out with the risk management message to a wider range of stakeholders, and not just at national level, said Wild, who is also group chief risk and insurance officer at Veolia, the giant water, waste and energy utility firm.

“We have to be more in tune with regional stakeholders in both public and private spheres, including city authorities and local councils – these are the so-called Terre de Risques or ‘lands of risks’,” he said.

“With recent crises, globalisation has largely been fragmented, and public and private organisations are dealing with depleted resources. So the idea is not to close ourselves in but to look outwards to the ‘lands of risks’ and see what the opportunities are, and who we could and should work with: clients, suppliers, NGOs – the whole ecosystem,” continued Wild.

“This is a journey, and the recent captives legislation in France is an opportunity in this regard to take our own destiny in our hands. It is an opportunity to put money aside in captives or as provisions, so that you have the mechanism and resources in place to cope when the crisis hits,” explained AMRAE’s president.

Wild pointed out that companies had been expected to do a lot to cope with recent crises but need the resources to survive. “The insurance market has become more risk averse. The captive does not replace insurance but it is a way to catch up with insurance and meet again. I call it a rocket. At the base of the rocket is risk management – identifying and understanding risk. Then the next layer is self-insurance, and then you use insurance. When that is all soaked up then you may go to the state,” he explained.

Wild believes that recent crises mean the classic model of risk transfer has reached its limit and the market needs to rethink the way it does things. This was not just sparked by Covid-19. It happening already as the insurance market turned in 2018.

“It was clear that we needed to find that enhanced resilience, and the captive is part of the way to do that. Along with natural catastrophes and the energy crisis, it is all becoming more complex so we need this re-set,” said Wild.

The AMRAE president said that captives are part of the solution, and the primary objective of the new French rules is to ensure that any firm, large or small, can create a captive or other form of self-insurance to become more resilient.

“It was very limited who could create a captive in France because it was restricted, costly and you needed to be a true multinational to consider it. Now there is the opportunity for smaller companies to do this while keeping the capital in France. I have already heard talk of sectors creating industry captives such as for artisan carpenters, who could take a quota share on an individual basis. This is really interesting. It is basically good treasury management, making sure you can pay your bills,” said Wild.

One big positive is that the French captives and other self-insurance structures will be fully regulated by the French insurance supervisor under Solvency II, and so robust.

“I think this is fantastic news. It won’t happen overnight – perhaps ten more captives this year in France on top of the existing ten, but in year two to three I think it will be interesting. The levels of provisions allowed will be higher and so we will see new structures arrive. The dialogue with the insurance market was broken in 2019, it was fractured. We have seen the arrival of the cyber mutual MIRIS; such a structure has not been created for years. This crisis has actually given us risk managers an opportunity that must be welcomed,” said Wild.

* To register for AMRAE conference please go to www.amrae-rencontres.fr