AM Best report: Europe's captive sector thrives amidst hardening market

11 November 2021 — Daniela GHETU
Amid tougher renewal discussions in Europe, there has been an uptick in the use of existing captives, as owners increasingly seek optimal risk transfer solutions, AM Best's new Market Segment Report found out.

The report looks at the background to this development. It notes that price increases in the (re)insurance market began to appear as early as 2018 in some segments. The market has continued to harden since, with commercial insurers and reinsurers commonly reporting rate-on-rate increases, and a tightening of terms and conditions.

Lately, several captives have increased retentions or limits of existing cover, sometimes actually entering into new lines of business as their parents have opted for an increasing captive utilization, the report found out, concluding that there is a visible expansion of business volumes for the captive industry. At the same time, the number of captives didn't change much, somehow contradicting AM Best's expectation of seeing an increasing number of captives registered in Europe.

Main takeaways of the report:

  • AM Best-rated European captives have been resilient to the COVID-19 shock, generally maintaining stable ratings fundamentals during 2021.
  • Captives provide their owners with the flexibility to navigate the insurance cycle and maintain access to cover on an ongoing basis.
  • Commercial insurance rate increases are driving an uptick in the use and importance of captives.
  • Captives' innovation initiatives are usually driven by the needs of their parents.
  • A captive's approach to ESG is often closely linked to that of its parent organization
To download a complimentary PDF copy of the full report, click here.

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