France has made a dramatic move into the captive insurance scene, reshaping the European market as industry experts examine the momentum behind its surge in new captives
A quiet revolution in Europe’s captive insurance industry is gaining momentum — and it is happening in France. Following the passing of new captive legislation in 2023, France is ramping up its standing as one of the major captive domiciles on the continent.
In its latest report, AM Best highlights that France is leading the way for new captive formations in Europe in 2023 and 2024.
France has long hosted captive insurance companies, but the introduction of a ‘resilience’ provision that allows captives to pool surplus to pay out on future claims makes it far more attractive as a location to domicile a captive.
This growing interest in French captives is happening against a backdrop of insurance market challenges across Europe. Rising premiums, stricter terms, and a hard reinsurance cycle are pushing corporations to explore alternative strategies.
Captives, once considered niche tools reserved for the largest companies, are now being recognised as practical solutions for a broader range of businesses. More companies are asking whether captives can help them stabilise coverage, better manage emerging risks, and gain control over their global insurance spend.
France’s decision to align itself more closely with proven models, such as Luxembourg’s approach to equalisation reserves, has already begun to reshape the landscape. Marine Charbonnier, head of captives and facultative underwriting, APAC and Europe at AXA XL, has witnessed this shift firsthand.
“The captive boom in France was triggered by legislative changes that took effect on 1 January 2023, which have made the country a more attractive option for French companies looking to set up a captive or redomicile from abroad,” she says.
“We have been involved in many of the new captives established in France since and even before these changes, and now we are working with more than half of the captive space in France. We are supporting over 60 per cent of the new captives created in France since 2021.”
Laurent Bonnet, head of captive and alternative risk transfer solutions at Marsh France, echoes this perspective. “Currently, there are about 20 active captives in France, and there have been a lot of activities in recent years. Many new captives have been formed.”
In light of growing interest, the French insurance regulator, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), has moved to provide further information on the agreed application process and requirements, expected timelines, and best practices for obtaining approval.
“They have basically put everything into one practical, easyto-follow guide,” Bonnet says. “It is not new rules, but a clear reminder of what the ACPR wants to see. That transparency helps everyone in the industry.”
This openness has already begun to encourage new market entrants. “This enhanced and more detailed guidance is likely to boost interest and activity in the French market because it offers clearer instructions and a well-defined framework for establishing and operating captives,” Charbonnier explains. “It has been designed to assist those who wish to set up their own structure, as well as to encourage those who have always dreamed of a captive but have never dared to do so.”
Though France still trails behind Luxembourg in sheer numbers, its growing appeal is clear. The recent licensing of Petzl Re, a reinsurance captive for equipment manufacturer Petzl, underscores this momentum. In October 2024, French aerospace and defense giant Safran also secured approval to redomesticate its Luxembourg captive and begin underwriting non-life risks at home.
Captive structures in France
A notable feature of the French captive industry is the preference for operating as reinsurance vehicles rather than direct insurers, as Bonnet explains: “In France, the most common captive structures closely align with those seen in other European domiciles, with few notable differences. Clients tend to favour this approach because it offers flexibility and can be better tailored to their business needs. Rather than fully operating as insurance companies themselves, these captives rely on international insurance carriers to handle complex matters such as compliance, claims management, and premium administration. This allows captives to focus on their role as reinsurers.”
While direct insurance captives do exist in France, they represent a small minority. According to Bonnet, the vast majority — around 99 per cent — operate as reinsurance captives. Contrary to what some might expect, this more favourable environment has not triggered an influx of small firms. Instead, the profile of companies setting up captives in France still closely resembles that of other domiciles. “We are typically talking about mid-to-large groups,” says Bonnet, noting that companies with an annual turnover of €1 billion to €10 billion are common candidates.”
Adding to that point, Fabien Graeff, head of Risk and Analytics for France at WTW, explains: “In France the only possible structure for captives is a wholly owned single parent or pure captive as other captive structures, like cells or group captives, are not considered as captives by the ACPR.”
Graeff notes that the modified French captive regulation applies only to the reinsurance captive structure. This implies that the vehicle must adhere to the captive definition and function solely through reinsurance, excluding direct-writing captives. Otherwise, the general insurance rules should be applied.
Interestingly, no single sector dominates France’s captive scene, Bonnet says. Instead, ownership structure and a company’s cultural roots often matter more than industry type. Some captives are formed by organisations with partial state ownership, such as La Poste and Orange. “For these organisations, the ability to establish a captive domestically made decision-making easier and aligned with their strategic priorities, especially when they wanted to avoid setting up captives abroad,” he adds.
Family-owned businesses with deep French roots also find the domestic approach appealing. Bonnet notes that for these companies, “the idea of setting up a captive outside of France was less appealing, reflecting a sense of national pride or French patriotism”. He points out that while no specific sector leads this trend, “the common thread lies in shareholder structure and a preference for keeping operations within the country”.
On the other side, Charbonnier notes that the traditional perception of captives being exclusively for large French corporations is shifting. “It used to be just the largest players, but we are seeing increasing interest from companies of all sizes. The revival in France is opening doors to a broader segment of the market.”
Graeff echoes this observation, highlighting that the profile of companies exploring captives has broadened to include smaller firms. “Previously, only large companies were interested in captives. In recent years, mid-size companies have also started structuring captives in France. Typically, businesses with up to €500 million in revenue or €1 million in premiums can now consider the concept,” he adds.
From traditional to emerging risks
As for the types of risks covered, French captives have traditionally focused on large liability and property exposures. These are high-exposure areas that can be difficult to secure in the commercial market, especially on favourable terms. According to Graeff, this is because property tends to carry the highest premiums and, therefore, offers the greatest potential for cost savings.
“Property is usually the most expensive line with the highest premium and so the highest arbitrage opportunity to be made,” he explains. “Indeed, to have a good return on capital and to cover the cost of captive management, a minimum premium level needs to be captured.”
However, the scope is expanding. Cyber risk, for instance, has emerged as a fast-growing line for captives. With cyber threats intensifying and commercial cyber coverage often pricey or limited, captives can help companies take more control over their cybersecurity strategies. Bonnet stresses: “Captives are increasingly used for cyber, particularly as capacity constraints and rising deductibles in the commercial market push companies to seek more flexibility.”
Charbonnier agrees with that point, emphasising how captives are adapting to address emerging risks. “Captives were typically used by clients to underwrite high-frequency, low-severity risks, but more recently many have been using their captives to underwrite less traditional lines of coverage such as cyber which are volatile,” she says.
In the aftermath of Covid-19, non-damage business interruption cover has also started appearing in captives. Companies want ways to build financial resilience against unforeseen disruptions that do not necessarily result from physical damage. Placing such coverage in a captive allows firms to gradually build reserves and better withstand unpredictable setbacks.
“This development reflects efforts to create financial mechanisms that allow companies to build reserves and better withstand unforeseen adverse events,”
Bonnet says. According to Charbonnier, captives possess a unique advantage in offering customised solutions for risks that traditional markets struggle to manage. “We have worked with a number of clients to place new and emerging risks into their captives, including political violence, environmental impairment liability, employee benefits, and even niche risks like construction, product recall, and non-damage business interruption coverage extensions,” she explains.
As sustainability and ESG considerations become increasingly important, captives are also playing a role in supporting corporate responsibility initiatives. Charbonnier highlights how captives can be leveraged to align with a company’s broader ESG strategy.
“When ESG is truly embedded in a company’s operations, there is often a strong correlation with their loss ratio,” she notes. “Captives can act as a key point to identify ESG challenges and help a company’s strategy for addressing them.”
Additionally, there is growing interest in innovative solutions such as parametric insurance. These policies, which trigger payouts based on predefined events rather than traditional claims processes, are particularly suited for risks like natural disasters. “We are seeing more interest in parametric solutions,” Charbonnier says. “They are especially appealing for risks where quick, transparent payouts matter.”
Regulatory considerations
Captives in France operate under a regulatory framework that has become increasingly competitive, particularly in comparison to Luxembourg, one of Europe’s leading captive domiciles. The introduction of a new captive regulation in France has brought its framework closer to that of Luxembourg, especially with the inclusion of an attractive equalisation reserve.
“France now has a regulation that is much closer to Luxembourg's, which has traditionally been our main competitor for captives in this region. We have essentially filled the gap,” says Bonnet.
The equalisation reserve stands out as a key feature of France’s tax framework for captives. It allows captives to allocate up to 90 per cent of their profits into a tax-free provision, which can be drawn upon during difficult periods. This mechanism enhances financial stability and makes the French regime an attractive option for companies looking to establish a resilient captive structure.
Bonnet highlights: “For any group considering a captive solution, it’s definitely worth looking at what France can offer rather than automatically choosing Luxembourg, which has been the go-to jurisdiction.”
In addition, France’s regulatory approach aligns closely with Solvency II, ensuring consistency across the EU. While the ACPR adheres to the same EU standards as other domiciles, it places a particular emphasis on understanding how captives model and manage their risks.
This has led to slightly more conservative expectations during the approval process, though operational requirements align with those in other jurisdictions. Bonnet explains that the French regulator frequently shows a strong interest in comprehending the underlying risks of a captive, particularly in the modeling of these risks.
“As seen in the past, regulators may expect captive owners to conduct thorough risk analyses to ensure a clear understanding of exposures and confirm proper application of Solvency II requirements.”
Despite these regulatory advancements, France remains behind Luxembourg in terms of activity and ecosystem development.
Many French captives still rely on management structures based in Luxembourg for key services, including actuarial support and regulatory compliance.
Bonnet acknowledges this reliance but notes the ongoing efforts to localise these functions. “In the future, we may see the development of more dedicated resources in France to further strengthen this growing market,” he says.
For companies considering a captive solution, the choice between France and Luxembourg often depends on their operational footprint and strategic priorities.
Bonnet highlights the importance of substance when choosing a domicile: “If you are an international group with a strong footprint in France but none in Luxembourg, establishing a captive in France could be more relevant and strategic.”
While France’s regulation has closed many of the gaps with Luxembourg, some foreign companies may still hesitate to choose France due to unique challenges, such as linguistic requirements.
An old French law mandates dating back to the 16th century that all official documentation submitted to authorities must be in French, adding a layer of complexity for non-French groups. “While this may not be a major barrier, it is a small, unique consideration,” Bonnet notes.
Charting new frontiers
What does the future hold for French captives? Bonnet says that the priority seems to be consolidating the current situation while supporting growth. “A key question for the coming years will be how to support smaller entities in establishing resilient tools — whether captives or solutions like protected cell companies seen in other countries. The challenge lies in making these tools more feasible and attractive for smaller companies.” As the market continues to grow, he anticipates the emergence of more local captive managers in France. However, he also notes that many French captives already internalise much of their operations, setting them apart from captives in other jurisdictions that rely more heavily on external support.
While France’s captive market is still primarily domestically focused, Bonnet sees potential for attracting foreign companies in the future. “We are certainly open to welcoming foreign companies to establish captives in France,” he says. “However, the market needs to grow further and stabilise, with secure and predictable tax and insurance regulations. If these conditions are met, I believe France could become a very competitive and attractive domicile compared to other markets.”
Beyond expanding accessibility, the evolving risk landscape continues to amplify the strategic importance of captives. Charbonnier anticipates a bigger role for captives in the long run: “Ongoing challenges facing the (re)insurance market, including heightened natural catastrophes, ransomware attacks, and social inflation, are not going away anytime soon. At the same time, the changing risk landscape and increasing relevance of emerging and developing risks for clients will also support a bigger role for captives longer term.”
France’s progress has not gone unnoticed elsewhere in Europe. Spain and Italy, for example, are reportedly exploring similar moves to create domestic captive-friendly environments. While the traditional captive hubs — Luxembourg, Ireland, Malta — remain popular, the French example shows that a large industrial economy can reinvent itself as a credible captive jurisdiction in a relatively short time.
Though France has a long way to go to rival Luxembourg’s scale and expertise, it is already changing the conversation. With a stable regulatory framework, expanding local resources, and a growing reputation for innovation, France is proving its ability to compete and shows no signs of slowing down in the upcoming years.
