“Captive insurer numbers are set to grow in Europe as more jurisdictions seek to lure companies,” according to AM Best.
The ratings company made the statement in its latest market segment report on the European captive market.
Key takeaways include growth within existing jurisdictions and new domiciles coming online. Both these factors are expected to drive the increase in European captive numbers.
Since 2020, 13 captive insurance companies have been approved in France. AM Best expects this number to increase with the French risk manager association identifying more than 50 French corporates that have plans to set up a captive in the country.
AM Best found that Guernsey took the top spot among European captive domiciles, adding 12 new captive licences during 2022.
The ratings agency says: “The hard commercial insurance market continues to drive corporates to consider captive insurance opportunities [in Europe].”
“Solvency II amendments, expected to come into force from January 2026, should lead to a more streamlined, proportionate and risk-based prudential process for European Union-domiciled captive entities,” AM Best notes.
“Levels of preparedness for International Financial Reporting Standard (IFRS) 17 vary among captives,” according to AM Best’s observations.
European captives that are compliant to IFRS are working to implement the transition from IFRS 4 to IFRS 17, which came into effect on 1 January 2023.
AM Best’s ratings of European captives are typically “very stable”, with little movement year on year. During the past 12 months, all but one of the ratings were affirmed and their outlooks were maintained.
Following the improvement of the creditworthiness of the parent Deutsche Lufthansa Aktiengesellschaft, AM Best revised the outlooks of the ratings of the captive Delvag Versicherungs-AG to stable from negative.
