The Federation of European Risk Management Associations (FERMA) has confirmed there is an increased interest in captives, according to findings from the association’s latest report.
In a webinar, where FERMA discussed the report, Charlotte Hedemark, chair of the 2020 FERMA Survey Committee and board member of FERMA, said the use of a captive is the strategy that has increased the most in the last two years.
In 2018, only 15 percent of respondents said they would consider a captive, however, in FERMA’s latest report, which was before COVID-19 pandemic, 43 percent of survey participants said they would look at a captive as a solution to deal with risks that are difficult to place on the insurance market.
One panellist of the webinar, Oliver Wild, group chief risk, insurance and internal control coordination officer at Veolia, explained that the use of captive is on the rise due to the market conditions.
Wild outlined that the industry is looking at a tough market after a very soft market over a number of years.
He stated that the increase in rates and inclusions and the reduction of capacity is on the rise and a continued trend from last year.
However, Wild noted that “having a captive, if you don’t have one already, requires a good level of maturity and understanding of your risk”.
Wild said: “Captives [are] a useful tool to integrate what is almost a well-known occurrence of [the] risk and you would only transfer volatility to the market if that’s clear.”
He added that captives can be “quite a tricky financial tool but it has a number of benefits if you manage it well”.
Recently, FERMA also added two new members to its board.
In addition to the board appointments, Dirk Wegener, president of FERMA, outlined the steps that FERMA has been taking to support its members and European businesses in the face of COVID-19.
Wegener noted that FERMA is currently focusing on its proposal for a European Catastrophe Risk Resilience Framework to address future pandemics and other systemic risks across Europe.
Wegener also set out the broad framework that FERMA has created to strengthen its position as a strategic partner for the European Commission by linking FERMA’s workstreams with specific commission programmes.
These include a new sustainability committee for A European Green Deal; a digital committee for A Europe fit for the digital age; the Solvency II and captives committee for the commission programme An economy that works for people; and in response to the COVID-19 crisis, FERMA has created its Resilience Taskforce.
