Brave owners promise a bright and innovative future for captives

The day began with a panel of new captive owners discussing their experience of conducting a feasibility study, choosing a domicile and forming a captive. In the afternoon, two experienced captive owners discussed how their captives had evolved over time. There was also an exclusive update from Patrick Tiernan, Chief of Markets at Lloyd’s, on the Lloyd’s captive syndicate project.

The forum had two streams of content – the first was the captive boot camp, designed for Airmic members who were new to captives and wanted to learn more. The second was a series of roundtables for experienced captive users keen to debate more innovative strategies and new uses for their insurance subsidiaries.

Airmic’s CEO Julia Graham moderated a panel on the future of captive insurance at the end of the forum. The panel addressed the rise in third-party risks going into captives, the expanded role captives are playing within parent groups as a result of the hard market and how captives can support ESG betterment efforts.

Comments from speakers

Elke Vagenende, Global Head of Multinational at AIG, said that, as a fronting partner, they had noticed increased participation of captives in third-party lines, such as warranty products for customers. “The word that we’ve heard a lot today is diversification of risk,” she said.

“Whether you should take third-party risks in your captive or not is often a question of philosophy. Most captives have a rule or position where they only want to insure their own parent or subsidiary risks. However, there is a growing proportion of captive owners who take third-party risks.”

Ciaran Healy, Director of Client Solutions for EMEA at Aon Captive & Insurance Managers, said corporates were becoming more ambitious in what they insure and how they deploy their captive. “I’m seeing a lot more bravery among captive owners recently, and that’s really healthy,” he said.

“We can use the captive as a way to drive some of the changes that we need to see. The risk register is changing to the extent where insurability is being diminished. Let’s use the captive, in conjunction with insurers, as the incubator to prove the underwriting concept. We can work with insurers to create the market.”

Healy believes corporations’ ESG betterment efforts are another driver of more innovation in the use of captives. “There’s a lot of very interesting things happening, that five, ten years ago, people wouldn’t have thought would happen because regulators or tax authorities would put roadblocks up,” he added. “Now we’re seeing that’s not the case. Regulators need to get on board with the sustainability agenda, for example, so we are seeing more innovative approaches to support the parent’s ESG agenda.”