Asia is experiencing an unprecedented level of sophistication within captive owners, according to Aon’s Asia Market Review 2017.
The fourth edition of the annual report on Asian insurance and risk trends revealed that, of all captive owners, the majority hold gross line captives seeking to manage and control external risk transfer costs as well as group retention costs, taking a ‘total cost of insurance’ risk approach to their risk-related decision making.
The Asian captive market has continued to grow at a “steady pace” during 2016, the report said, with 71 captives active in Singapore, 40 in Labuan, 18 in Micronesia and three Hong Kong.
Aon found trends of captive clients writing traditional lines such as property and liability risks, however, the company has also seen an increase in clients seeking to participate in non-traditional lines such as cyber risk, employee benefits, trade credit and environmental liability.
Although there are signs of positive growth, uncertainties around tax strategies and reputational impact are still holding the region back, Aon said.
In an effort to address this issue, the Monetary Authority of Singapore has recently introduced the Organisation for Economic Co-operation and Development’s (OECD) base erosion and profit shifting standards.
In addition, the monetary authority will withdraw its tax exemption on 31 March 2018, to comply with OECD guidelines.
The report suggested that this is a “positive step” for Singapore, as the option will remain for organisations to use Singapore as a route into Asian markets.
Geoff Lambrou, chairman of Aon Risk Solutions Singapore, said: “In 2017, we expect that capacity will remain abundant in most territories and will continue to enter the market through a variety of different vehicles.”
He added: “This, coupled with a continuation of a benign loss environment and positive underwriting results for most insurers during 2016, should exert further downward pressure on rates in most classes of insurance during the forthcoming year.”