| Global corporations increase self-insurance
Although annual captive premium income is estimated at $55 billion – $60 billion, Marsh's report, ‘Next Generation Captives — Optimizing Opportunities’, is the first detailed look at how their use compares by region, by domicile, and by industry. The report found that while captives are significantly better capitalized than required by current levels of risk assumption, many are not optimizing their captive structure. Other key findings include: * The cumulative number of captives has increased at a steady rate since the early 1980s. * US companies own 57 percent of the world's captives and all companies that comprise the Dow Jones 30 own captive. * UK, French and Swedish companies are, respectively, the second, third and fourth most prolific owners of captives. * Bermuda is the most popular domicile for captives, accounting for 29 percent of the total. However, altogether, the US-based captive domiciles now account for 30 percent of the total. Among European captive domiciles, Guernsey continues to have the largest number of captives. * Financial institutions account for 20 percent of all captives, with healthcare companies owning 11 percent and manufacturers 10 percent. * Almost half of captives are currently achieving a return on capital employed of greater than 10 percent. However, more than one-third have a return of 5 percent or less. * Globally, almost 60 percent of captives do not use reinsurance. When considered in conjunction with the level of retained profits held by captives, this suggests that most captive business continues to be profitable. There is also evidence that once a company decides to pay premium to a captive, versus the general insurance market, a significant majority of that premium is permanently removed from the market.
•Date: 16th April 2008• Region: World •Type: Article •Topic: Operational risk
|
