The gross written premium (GWP) of European captives surveyed by reinsurer SCOR in its latest report increased by 4.8 per cent between 2019 and 2020, compared to 3.2 per cent the previous year.
The study, ‘European captives: analytical review of Solvency II reports’, provides a quantitative overview of 187 European captives owned by large industrial and commercial companies that write property and casualty (P&C) risk.
The report offers a statistical analysis of the sample, divided into captive and parent company domicile, premium, assets and reserves by line of business, solvency ratios and capitalisation.
The leading sectors in the sample are energy, mining, power and utilities, food and agriculture, construction and engineering, chemicals and pharmaceuticals, and financial services.
The total assets of the sample captives amount to more than €23 billion, and write more than €4.4 billion in GWP for P&C. Of this, 84 per cent of premium was written in Luxembourg and Ireland, which are identified by SCOR as the two leading European domiciles, with 89 per cent of captives situated in either of these countries.
Luxembourg and Ireland are followed as leading domiciles by Sweden, Malta, Norway, The Netherlands, Germany and Gibraltar.
Parent companies of captives are mainly based in western Europe, including France, Belgium and Germany. Most Luxembourg-domiciled captives have parent companies based in Belgium, Spain and France, while the majority (91 per cent) of US-based organisations locate their European captives in Ireland.
75 per cent of business written by surveyed captives is fronted, as there are no regulatory restrictions regarding the classes in which a captive can provide reinsurance services (providing they have a partnership with a licensed fronting insurance company from which they accept the business).
In addition, 26 per cent (€1.2 billion) of the premium written by the captives is retroceded, predominantly in the marine and property lines, while the main risk is non-life underwriting risk, which makes up 68 per cent of the capital requirement.
SCOR calculates solvency ratio as the eligible own funds amount divided by the solvency capital requirement. Captives in the sample have a strong average solvency ratio of 277 per cent, while the median ratio is around 175 per cent.
The reinsurer notes that 43 per cent are capitalised at more than double the regulatory requirement
The report was compiled by Jacky Mochel, chief technical officer of alternative solutions, and Mathieu Pasqual, deputy chief underwriting officer of speciality insurance, alternative solutions at SCOR P&C.
