Captives hit by Solvency II

Smaller monoline insurers, mutual insurers and captive insurance companies will be worst hit by Solvency II rules Guenter Droese, chairman of the European Captive Insurance and Reinsurance Owners Association, writes in the FT

“These smaller and much less sophisticated companies cannot benefit from internal models in the same way as the larger insurers due to their size and the cost involved,” he writes.

Captives essential

“Captive insurance companies are an essential component in alternative risk financing for commercial, industrial and financial institutions and provide important capacity for insuring the large group risks, which often is not available in the traditional insurance market.

“It is for this reason that they have to be recognised under the Solvency II process for what they are and there has to be a distinction made between the professional insurance companies and the smaller, but equally important, insurance companies dedicated to covering a specific need in the market.

“Many captive owners will undertake the fifth quantitative impact study (QIS5), as required under Solvency II, with the aim of assessing their own capital adequacy and also with a view to providing some data that they can use to illustrate their specific issues to their national regulators and then collectively to the EU.”