Has the captive’s movement been launched? A beginning of reality
The movement seems to have started for captives domiciled in France. In only one day, on June 18, the Autorité de contrôle prudentiel et de résolution (ACPR) gave its approval to two French groups, Bonduelle and SEB, to create their own reinsurance captive in France. They became respectively the 7th and 8th French groups to hold a captive in France and therefor join a very restricted circle of French companies.
In this way, Bonduelle inaugurated its reinsurance company Bonduelle Ré, and SEB its captive Groupe SEB Ré in June alongside its broker Gras Savoye Willis Towers Watson. The two reinsurance companies were thus able to start their non-life insurance activities for their respective group entities from July 1.
These decisions are mainly motivated by the need to adapt to the increasingly difficult insurance market. According to Bonduelle’s Deputy Managing Director for Finance and Development, the group is “adapting its risk management strategy to market conditions and to the emergence of new risks”. A similar position was taken by Groupe SEB. According to the company’s insurance manager, the captive offers both a key device in their risk management and financing and sends a positive message to insurers. The Groupe SEB broker explains that the choice of domicile for the captive “was naturally made in France, in particular for better governance”.
These creations are probably related to the constant rise since 2019 in Europe of prices on the insurance market. Facing some drastic increases, the captive is for companies a financial and legal management tool offering them additional leverage against insurers.
Indeed, the government has announced a future incentive for the creation of captives. This project would consist, following the health crisis, in giving French companies an additional means of provisioning their future risks, partly through self-insurance. However, now in France, tax and regulatory limitations make it very unattractive to set up a captive insurance company. The 2022 finance project law does not include this project; parliamentary amendments are underway to perhaps introduce it.
The creation of a captive, as a credible alternative for negotiating with insurers, is prepared in advance of contractual renewals. The January 1, 2022 renewal campaign, which is just beginning, will probably confirm this: creating a captive often becomes a serious option.