Tibor Boettcher, CEO and executive director of Volkswagen Insurance Company, shares with Diana Bui how the captive plays a crucial role in the automotive giant’s risk management strategy
Established in 1991, Volkswagen Insurance Company (VICO) was founded during a period of significant expansion for Volkswagen. During that time Volkswagen Group acquired major brands such as Škoda in the Czech Republic and Porsche in Germany while also increasing its joint venture activities in China. As Volkswagen Group grew, so did the need for a robust insurance mechanism to support its expanding operations. Over the past three decades, Volkswagen’s global footprint has expanded dramatically, with new brands like MAN joining the Group, increased car deliveries worldwide, and the establishment of new production plants. “Growth of the VW Group over the last three decades has been substantial,” says Boettcher. “As a result, there are higher values to insure and more risks in the portfolio, making insurance coverage increasingly important for the group.”
VICO plays a crucial role in managing these risks by underwriting insurance that is difficult to place in the external market. The captive serves as a vital risk management and risk transfer tool for Volkswagen and its brands, ensuring that the group has comprehensive and tailored coverage. “The captive plays an essential role as a risk management and risk transfer tool for Volkswagen and its brands,” Boettcher adds.
Risk retention and insurance strategy
Volkswagen’s captive has been domiciled in Dublin, Ireland, for over 30 years. The choice to establish it in Ireland was mainly driven by regulatory considerations. Over time, the captive has evolved significantly to support the group's extensive insurance needs.
VICO currently underwrites seven lines of business, with marine cargo and property being the largest. The decision on which risks to retain within the captive and which to place externally is made through an annual strategic discussion with Volkswagen Insurance Brokers, the in-house broker based in Germany.
“Each year, we review upcoming renewals and determine which risks to place in the external market and which to retain within VICO,” Boettcher notes. “The outcome is a well-balanced mixture of traditional insurance coverage and captive-supported coverage. Internally, we then determine the retention rate and align it with our reinsurance structure.”
The captive assumes approximately 60 per cent of the overall capacity for the lines of business it insures, with the remaining risk placed in the open market through major insurance companies in Europe and beyond.
The role of the captive extends to claims management as well. The in-house broker serves as the first point of contact for Volkswagen brands handling insurance claims, while VICO operates primarily as the capacity provider.
“The in-house broker has dedicated specialists for each line of business, as well as an operations and claims department,” Boettcher highlights.
“VICO works closely with the broker, particularly in cases of large losses. Often, co-insurance partners are also involved in the claims process. This setup ensures that the relevant expertise is available to provide optimal service to Volkswagen brands.”
Regulatory compliance
As a European captive, VICO is regulated by the Central Bank of Ireland and falls under the European Insurance and Occupational Pensions Authority (EIOPA). This means the captive must comply with Solvency II regulations, which require it to maintain a Solvency Capital Requirement (SCR) ratio.
VICO reports this quarterly and annually to the Central Bank of Ireland. “Compared to the US market, the European regulatory framework is quite stringent,” Boettcher explains. “Captives in Europe must comply with many of the same requirements as large insurance companies, though some exemptions exist, particularly in Ireland. However, regulatory requirements are tightening, making it increasingly complex to operate a captive in the EU.”
Emerging risks and claims managementBetween 2017 and 2023, Volkswagen operated a second captive in Ireland — Volkswagen Reinsurance Company — focused on employee benefit business, particularly expatriate healthcare. However, the group ultimately decided to discontinue this captive and rely on the external insurance market for this coverage.
“We realised that specialised external health insurance providers offered a better solution in terms of quality, service, and pricing,” Boettcher says. “This decision allowed us to refocus our captive efforts on core business risks through VICO.”
Emerging risks, including cyber threats and climate-related challenges, are a growing concern for multinational corporations like Volkswagen. VICO has adapted by actively providing cyber insurance cover to the Group.
“As a captive, we closely monitor emerging risks and engage in discussions with our reinsurance partners, the in-house broker, and Volkswagen brands,” Boettcher explains. “We also stay connected with the external insurance market and industry trends by attending events and training sessions.”
Another advantage of captives is their ability to secure insurance capacity during hard market conditions. “Captives provide stability, making companies less dependent on external market cycles and trends,” Boettcher remarks. “This allows for more predictable insurance costs and ensures that coverage remains available even when external markets tighten.”
Financial stability and future outlook
Over the past decade, Volkswagen’s captive has paid out a significant amount in claims to its brands. The role of VICO extends beyond risk financing — it also supports Volkswagen’s financial and operational stability. “With the insurance products we provide, VICO contributes to the financial security of the group and its brands,” Boettcher states. “In cases of large losses, the captive ensures financial stability by mitigating the impact on the brands’ profit and loss accounts.”
A notable example was the sinking of the roll-on/roll-off cargo ship Felicity Ace in 2022. “VICO insured the transportation of Volkswagen Group cars on board that vessel,” Boettcher said. “When the incident occurred, the captive played a key role in paying out a significant portion of the overall claim. This demonstrated the strategic advantage of having a captive in place.”
From an operational perspective, VICO contributes to risk management solutions and overall risk optimisation within the group. Looking ahead, Boettcher believes captives will play an even greater role in corporate risk management. “I believe captives will become even more important for large groups like Volkswagen as risk management and risk transfer tools,” he says. “One area where I see great potential is optimising captive processes and communication through AI, particularly in risk modelling and the exchange of premium and claims information.”
VICO remains a fundamental part of Volkswagen’s risk financing strategy, integrating captive capacity with external market expertise to provide customised insurance solutions. As Volkswagen continues to adapt to a shifting risk environment, its Dublin-based captive is set to play an even greater role in securing the group’s financial stability and resilience.
