UK regulators to convene captive roundtable in next stage of discussions

March 6 - (The Insurer) - The UK is pushing ahead with plans to implement a new captive framework, with the Prudential Regulation Authority seeking to convene a roundtable of existing captive owners and Airmic members as part of the next stage of dialogue.

The move follows the end of an HM Treasury consultation on the development of a new approach to captives, which closed on February 7. HM Treasury is currently in the process of analysing public feedback to the consultation.

Airmic hosted its Captives Forum in London on Wednesday, with the latest survey by the UK risk management association finding that 72% of its members that don't currently own a captive are exploring the possibility of forming one in the future.

During the forum, Dan Sammons, captives manager at HDI Global UK & Ireland, highlighted how captives are increasingly being used as part of corporate strategies, with around 7,000 now operational in more than 60 domiciles across the world.

“Most respondents are looking to create a captive even though we’re entering into a softening market. Captives are for life, not just for Christmas," Sammons said.

Franck Baron, chief risk officer at health and security services firm and captive owner International SOS, said interest in the captive market goes beyond a response to commercial market conditions.

“If the captive is properly designed, properly acknowledged by the parent company and properly aligned with the business strategy of the parent company, the captive evolution, deployment and growth should be disconnected from the cycles of the insurance market," he said.

"This is what we do at International SOS. I don't care about the price of the market. When we put risk into the captive because we think that we understand the risk, and we think that there is a merit for the parent company to have the financial stake in it, obviously we are looking at optimising risk financing, but for me it is irrespective of the market cycles.”

Richard Paris-Smith, client services leader at Strategic Risk Solutions, described captives as "inherently agile" vehicles.

“Captives are often formed to meet a specific purpose. It might be the challenge of a suddenly hard market, or the absence of capacity. Even when that happens, there should be a structured approach and an analytic process of thinking whether the captive will help with that particular problem," he said.

"They might be also formed as part of a long, detailed series of thought processes that can sometimes take years, so a captive might be formed as part of a general broad strategy, but either way, they can and they should, and they generally do, become a dynamic, long term strategic tool for the risk management function of the parent organisation.”