Reassess Captives In Soft Market: AIRMIC Expert

An expert at a captive insurance industry conference in London is advising that as insurance prices fall it is a good time for owners and managers of captive units to evaluate whether their facility is giving desirable results.

The remarks of David Hertzell, chairman of the Association of Insurance and Risk (AIRMIC) captives focus group, were reported in an AIRMIC release concerning their annual conference.

The range of activities performed by captives and the number of different forms they can take have grown significantly in recent years, Mr. Hertzell noted. At the same time, however, the market in which they operate has changed, he said.

Mr. Hertzell noted that emerging captive centers, such as Malta and Gibraltar, present opportunities and challenges. These challenges range from the type of business being written to tax authorities and legal developments.

"There's a temptation to do something because it's what you've always done, and captive owners are as likely to fall into this trap as anyone else. Now would be a good time to have a spring clean," he said, according to AIRMIC.

Mr. Hertzell added that it's good practice to ask, "Why do you have a captive? Are the reasons still valid? Does it achieve its objectives, or would there be better ways of meeting them? Is the domicile you chose still the right one?"

He added, "I'm not saying that companies should dispose of their captives altogether, though a few risk managers may come to that conclusion. The issue is to ensure that your arrangements are the best for your company and then to make any necessary adjustments."