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According to insurers and captive owners attending a workshop at the conference, the European directive has raised costs and red tape for the risk transfer vehicles, particularly when it comes to stricter governance requirements.
On the positive side, however, the structured and more homogeneous approach imposed by Solvency II has made it easier for insurers to understand their captive clients and better adjust price and conditions to risk profiles.
As a result, contrary to market fears that Solvency II might decrease the use of captives, companies are increasingly using these vehicles to transfer both traditional and non-traditional risks, the experts said. They also stressed that captives are coming in handy to reduce price volatility as the insurance market shows signs of hardening.
“Regulatory expansion has given captives a new dimension,” said Marine Charbonnier, head of integrated solutions ART at AXA Corporate Solutions. “We were afraid of Solvency II and the preparation stages were very intense, and not a little stressful. Finally, however, it has been quite positive,” she added.
A benefit of Solvency II is its promotion of a standard risk model for captives close to insurers’ own internal models, making it easier to evaluate credit risk. “It also enables us to offer conditions that are more refined and more adapted to their risk profile,” said Ms Charbonnier.
Solvency II has forced captives to improve their governance structures. As a result, insurers can more easily find people to discuss the risks facing, and needs of, a captive.
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