Spanish risk managers stepping up push for friendlier captive rules

The push to ensure captives can be created in Spain is gaining momentum, with risk managers from the country set to start discussions after the summer about proposing regulatory changes.

A working group from Spanish risk management association Agers has been created to discuss delivering more favourable rules that help companies set up their risk retention tools in Spain. The goal is to take those proposals to the Spanish government.

The announcement was made by Alicia Soler, secretary-general of Agers, during a webinar organised by the association.

Spanish companies still make little use of captives. A report by Scor last year found that only nine EU-domiciled captives were owned by groups with headquarters in Spain, compared to 45 for France and 25 for Germany.

Brokers say that interest in risk retention tools is on the rise in the Spain, partly in response to the recent hard market. However, they note that because not many Spanish companies are big enough to generate sufficient premiums to justify setting up a captive in Luxembourg or Ireland, protected cells have become a significant source of queries from clients in recent months.

There is a view in the market that Spanish companies aren’t pursuing sophisticated risk retention strategies because Spain’s legislation does not make it easy to set up captives onshore.

Ignacio Gomar, head of insurance at energy group Naturgy, said in early June, during an event organised by Mapfre Global Risks in Málaga, that captives will play an increasingly important role in risk management strategies.

But according to media reports, he also noted that setting up a captive in Spain is not feasible at the moment. Naturgy has a Luxembourg-domiciled captive, and Gomar pointed out that “technical conditions” are not conducive to relocating the tool to the domestic market.

Participants in the Agers webinar urged the association to convince government that it should follow France’s example and reduce the tax burden on Spanish-domiciled captives.

Speakers noted that captives are set to become more important risk management tools because they can help manage increasingly severe exposures created by climate change and other ESG trends.

“Captives will play a vital role in companies’ ESG policies,” said Ainara Saavedra Barandiarán, the captive fronting manager at Zurich in Spain.

For his part, José Ignacio Delgado Cid, a director at Marsh in Spain, detailed the advantages and disadvantages of domiciles like Ireland, Malta and Luxembourg. He said the latter seems to be the most attractive option for Spanish groups to set up captives in the EU.

Cid also warned that any company interested in setting up its own captive, no matter the jurisdiction, should be prepared to deal with plenty of red tape.

“Captives also have enemies, and, to a certain extent, they are regulators,” he said. “Captives must comply with ever-more complex demands from regulators. Since Solvency II was implemented, they have become increasingly complicated, especially for non-listed firms.”