As Asian companies are becoming more sophisticated they are also beginning to look at alternative ways, such as captives, to manage their risk.
A number of these Asian countries have begun investing in the infrastructure and legislative frameworks necessary to facilitate captive formations with a view to creating attractive environments for new business. They have also been seeking advice from a variety of established captive domiciles in order to decide which models and regulatory frameworks to emulate.
Communications director at Willis Global, Nathan Hambrook-Skinner, said: “So far we have seen a mixture of models. Hong Kong has a framework very recognisable to the rest of the captive world, with comparable capitalisation and regulatory rules to the largest captive centres in the Caribbean and the US.”
“But it is much less established than Singapore or even Labuan, so growth there will depend primarily upon the development of captives in the Chinese market. To compete with the other domiciles in the region for business from other parts of Asia Pac, it will need critical mass.”
There are regulatory barriers, in China particularly, that could make it difficult to use a captive to write risks in home territory, rather than just international exposures.
While it is too early to tell how the market will develop, Hambrook-Skinner claims that it is possible to foresee the development of an “onshore” Chinese domicile in the Shanghai Free Trade zone. There may also be a relaxation over time of the regulatory rules enabling companies to write more corporate risk through an offshore vehicle.
Paul Owens, CEO of Willis's Global Captive Management practice, commented: "The use of captives has, until now, been the domain of Western corporations. But now Asia wants to catch up."
"Corporates in Asia are challenging the traditional and looking for alternatives to the risk transfer–based insurance policy. In many cases they have assets across the world and are now waking up to the advantage of using a captive."
