‘Captives need to up their game’

Captive managers will have to up their game – Swiss Re Corporate Solutions

Solvency II is pushing Captive insurance companies into a new world where they face greater scrutiny and tougher questions, according to a speaker at the forthcoming 2013 Airmic annual conference.

Things will never be the same for Captives when Solvency II comes into force in the view of an expert from Swiss Re Corporate Solutions who will be leading a workshop at the annual conference in Brighton.

“Senior executives are going to take more interest in the Captive, and they will ask more searching questions. Captives are going to be under the spotlight as never before,” says Roy Baumann from the Strategic Solutions team, part of whose job is to advise on the best structures for Captives. “The stakeholder environment will be a lot broader and more demanding.”

CFOs and Treasurers will be among those colleagues who have not previously shown much interest in the subject but will be doing so in future.

Although Solvency II is due to come into force in 2016, organisations are already gearing up for its implementation. For Airmic members, this may mean having to reassess fundamental aspects of their Captives, including domiciles, lines of business and indeed their whole purpose.

In the process, says Baumann, risk managers will have to increase their technical knowledge and be able to discuss, for example, the value of their Captives and their appropriate cost of capital.

He acknowledges that Solvency II, as a measure designed primarily to regulate conventional insurance companies, is not entirely appropriate for Captives. Nonetheless, it is a fact of life and will place new restrictions, for example, when it comes to asset allocation.

He suggests, however, that risk managers should see these new demands in a positive light, as part of a process that has value in its own right. “It does sharpen the arguments and sharpen the thinking, and that can help to make use of the Captive more effective,” he says.

Not that there are always going to be straightforward answers. Leading the workshop with him will be people from Clariant and Aon Global Risk Consulting.  “We all have strong views, we all have different views. We disagree sometimes. It should be fun.”

Workshop B8, “Aligning the logic of Solvency II with Captives,” takes place on Tuesday June 11 from 2.15pm to 3.30pm.