Far from the planned European capital adequacy regime being the death of captives, Solvency II will place the self-insurance vehicles at the centre of board-level risk discussions.
At CRE's Emerging Risk, Risk Regulation & Market Dynamics In The Nordics seminar, Martin Persson, Managing Director of Aon Global Risk Consulting AB, the insurance management and consulting division within Aon Sweden, gave a positive outlook for captives treated as proper strategic risk management tools under Solvency II.
The spotlight placed on captives under Solvency II will likely lead to the vehicles becoming more important risk management tools that garner increased attention from boards and top management on risk, he said.
He conceded that Solvency II will likely be the 'final nail in the coffin' for captives operating purely for tax purposes and a without proper risk management focus. But for the overwhelming majority that are treated as strategic risk management tools and part of an ongoing risk management programme the regime, which is scheduled for introduction in January 2016, will likely have the opposite effect, said Mr Persson at the event in Stockholm sponsored by ACE.
Persson also said that although the Swedish regulator has held open discussion over the treatment of captives under Solvency II some areas need further attention and explanation.
He would like to see more flexibility in how actuarial rules and standards will apply to captives under Solvency II, clarification over the use of safety reserves as capital, an explanation of how intercompany loans will be treated and clearer guidelines on reporting requirements.
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