Industry “optimistic” about government’s captive consultation

“Today we see 74 jurisdictions around the world with captive-friendly legislation – speed and proportionality – and we’re not one of them. And yet we’re arguably the epicentre of the global insurance market. And so it’s a great opportunity for us,” said Marsh McLennan UK CEO Chris Lay, speaking on the panel.

The panel discussed a wide-range of topics from market capacity to underwriting discipline but the role of captives was the “hot topic” of the debate. The UK government is due to publish the outcome of its captive consultation later this summer and is expected to propose regulatory changes that would enable the UK to become a captive domicile. Marsh’s Lay has been closely involved in the Treasury consultation and said there are “very encouraging signs” for a positive outcome.

Should it go ahead, the move is likely to trigger captive growth in mid-market companies that have previously been deterred by the cost of establishing captives on foreign shores, the panel agreed. Larger UK companies may also set up local captives to complement their offshore vehicles, especially for new risks that are becoming harder to insure.

While some large corporates have signalled their intention to relocate their offshore captives to the UK, Airmic is not anticipating an “avalanche” of relocations, according to its CEO, Julia Graham, who spoke from the audience. She also stressed this is an opportunity for the entire country: “Let’s be clear this is a UK initiative, not a London initiative.”

Emerging risks: the cyber blueprint

Turning to emerging risks such as PFAS and lithium batteries, the panel discussed how the evolution of the cyber market provides an example of how, historically, the industry always finds a way to cover new risks.

Cyber insurance has evolved from basic data breach coverage to a comprehensive risk management tool in a relatively short space of time. Today, insurers can even use predictive technologies to inform clients before an attack has taken place.

However, the industry as a whole needs to improve its efficiency and transaction costs in order to better serve its clients, according to Jane Kielty, CEO ofAON UK. “We are now starting to see a revolution in how we are using AI to help us with our jobs…and to spend more time with the clients,” she said.

While increased standardisation of data formats would be welcomed, said Tom Richardson, group insurance manager at ABF, it’s important to ensure AI doesn’t crowd out diversity and preclude bespoke service:

“There is a risk of too much automation if we, as clients, can’t differentiate ourselves. We want to understand how our risk management compares to our peers so if we are negotiating with a computer that just says ‘no’, then that’s not what we want to achieve.”

Risk and insurance takeaways:

• A “positive” outcome of the government captive consultation is widely anticipated;

• An onshore captive regime would drive mid-market growth;

• Insurers are using AI and automation to improve efficiency and transaction costs, but should work hard to protect diversity and differentiation.

The Panel: The Road to Industry Relevance

Moderator: Jill Douglas, Broadcaster & Gallagher Ambassador

Speakers: Nina Arquint, CEO UK & Ireland, Swiss Re Corporate Solutions; David Haas, Global Head of Casualty, CNA Hardy; Jane Kielty, CEO AON UK, Aon; Chris Lay, Chief Executive Officer, Marsh McLennan UK; Frank Streidl, Head of Commercial Insurance UK, Zurich; Tom Richardson, Group Insurance Manager, ABF.