Insurance rate increases are driving an uptick in the use and importance of captives in Europe, according to new analysis from AM Best.
In a report, entitled “Europe’s Captives Show Their Worth Amid Changing Market Dynamics”, AM Best highlights that the uptick in the use of existing captives is an industry response to hardening market conditions.
Many company’s captives are being used as tools to provide their owners with the flexibility to navigate the insurance cycle and maintain access to cover on an ongoing basis, AM Best says.
It also notes that several European captives have increased retention or limits on existing cover.
In some instances they have also expanded into new lines of business as their parents have looked at increasing captive utilisation.
The report also explains that while the hardening market provides opportunities for captives to demonstrate their value, it also presents challenges.
Many captives are highly dependent on reinsurance capacity to be able to offer the large limits required by their parent groups. Even those with good claims records, are likely to face price increases for their reinsurance programmes in the 2023 renewals.
