AM Best has predicted an increase in the formation of captives in Europe, in response to challenging economic conditions and the rising cost of insurance.
In a market segment report titled Europe’s Captive Segment Poised for Growth Amid Hardening Insurance Conditions, AM Best noted Guernsey, Luxembourg and the Isle of Man all saw a reduction in their number of registered captives during 2019. In each jurisdiction – Europe’s three largest domiciles for captive insurance companies – the number of licences surrendered exceeded the number issued, AM Best noted.
This trend is set to reverse in 2020 and 2021, AM Best predicted, as hard market conditions make captives more attractive as a risk retention tool.
Since the beginning of the year, commercial insurers and reinsurers have commonly reported double-digit percentage increases in rates, and a tightening of terms and conditions, AM Best noted, with casualty lines particularly affected.
“Amid tougher renewal discussions, AM Best has observed an uptick in the use of existing captives, as owners seek optimal risk transfer solutions,” the rating agency said. “A number of captives have increased retentions or…
