Updated: July 3, 2024 9:09 PM
Angus Scorgie, head of prudential regulation at industry body Insurance Europe, believes a consistent approach is essential to keeping Europe’s captive insurance industry competitive (file photo)
The European Union is actively reviewing regulations and policies for the captive insurance industry in an effort to attract more business from Bermuda and other offshore jurisdictions, according to a new report from Reuters.
The international news agency reported that a new opinion from the European Insurance and Pensions Authority has helped European captive insurers “become increasingly competitive in attracting insurers from offshore jurisdictions such as Bermuda.”
The new Opinion sets out a common appropriate approach to the supervision of captive insurers in order to “create a level playing field within the EU”.
“The purpose of this opinion is not to reintroduce new supervision requirements, but rather to improve union-wide supervisory culture and consistent supervisory practices, ensuring uniform procedures and a consistent approach across the union,” it said.
The document sets out supervisory expectations in several areas, including intra-group transactions (in particular cash pooling), consistent application of the prudent person principle, and governance-related aspects relating to key functions and outsourcing requirements.
Angus Scorgie, head of prudential regulation at industry body Insurance Europe, told Reuters a consistent approach was essential to support a competitive industry across Europe.
EIOPA said it was important for public authorities and national competent authorities to address national particularities in order to effectively harmonise regulations.
“This nuanced approach will not necessarily lead to regulatory arbitrage,” the report said.
This reflects stakeholders’ view that captives play an increasingly important role in today’s business world.
Captives assist companies when other insurers cannot cover their risks and allow companies to be more efficient in managing their risks.
Last November, a report by ratings agency AM Best predicted growth in European captive business this year as more jurisdictions seek them.
AM Best predicted that new amendments to Solvency II in the coming years and the upcoming requirements of IFRS 17 will have some impact on the market, leading to differing levels of preparation across captives.
France has introduced new regulations to support the establishment of captives in the country and is now one of the countries with the highest number of captives in Europe.
Until recently, the majority were based in permanent settlements overseas.
Between 2020 and 2023, 13 captive insurance companies were approved by domestic regulators, of which nine were reinsurance companies.
