The impact of solvency II on captive insurance companies

The ACE Group launched a new report that identifies the potential impact of the European Union's Solvency II regulatory requirements on captive insurance companies and offers an alternative insurance structure for risk managers of multinational companies to consider.

Authored by Suresh Krishnan, General Counsel for ACE's Multinational Client Group; Richard Sica, Executive Vice President, ACE Risk Management; Dan Brown, Partner, SNR Denton US LLP in London; and Barry Leigh Weissman, Partner, SNR Denton US LLP in New York and Los Angeles, "Structuring Multinational Insurance Programs: Solvency II and its Potential Impact on Captive Insurance Companies - Considering the Alternatives" is the latest in a series of ACE Progress Reports on current and emerging risk management issues.

The report outlines key assumptions behind the role that captive insurance companies play in a multinational insurance program and assesses how such assumptions may be challenged by the implementation of Solvency II's directives. It also analyzes some of the uncertainties that may affect much of the case for using captives, including capital and solvency requirements, and examines the scope and influence Solvency II is likely to have, such as its impact on jurisdictions outside of the European Union. Finally, the report introduces an alternative risk management structure for the risk management community to consider, which may provide similar benefits to those currently provided by captives.

"There is increasing awareness in the market about Solvency II's impact on captives," notes Mr. Krishnan, "and we believe it is timely for risk managers of multinational companies to re-examine their strategy behind their use of captives in light of Solvency II and consider whether it makes sense to supplement their captive strategies with alternative risk management structures."

The report is the sixth in the ACE Progress Report series to focus on various aspects of multinational insurance programs, all of which are available in the Media Center of the ACE Group website. ACE's legal and regulatory expertise backing these reports, in addition to its broad product offerings, local insurance professionals and network partners, ACE WorldviewSM information portal, and global client executives, are part of the company's Global Program Solutions, or ACE GPSSM , capabilities that leverage its full global resources to create effective insurance programs to address clients' specific risks and requirements around the world.