A captive insurer is an insurance or reinsurance company belonging to a company whose essential activity is not insurance. It allows a company to pool its risk over several years, several activities and several countries. The system has many advantages. In addition to optimizing insurance programs, it facilitates the reporting of information and makes it possible to cover complex risks.
Above all, captive insurers represent an alternative to the insurance market, which has been steadily increasing in price since 2019 and cannot meet all needs. Indeed, companies are faced with an expanding universe of risks. In addition to the increasing complexity of traditional risks – particularly industrial risks – there are now “cyber” risks and risks related to climate change.
Medium and large compagnies can have an interest in creating a captive insurer especially when :
The captive insurer will be used by the company as a tool to add additional coverage where needed or when it is too expansive to get from another insurance company.
The creation of a captive insurer can therefore be used by companies to limit the costs allocated to insurance and/or recover a portion of the costs incurred.
There are currently about 4,000 captive insurance companies in the world and very few of them are in France. Most of them are indeed located in countries offering favorable tax legislation as Luxembourg, Malta, Ireland, the Bahamas Islands, the Caribbean Islands, etc.
The relocation of captives on French territory represents a real issue of attractiveness as well as an issue of sovereignty. However, insurance is a heavily regulated activity which means creating a new insurance company is not an easy process. None had been created for decades until 2018. Therefore, the company willing to go through the trouble of creating a captive insurer should ensure it could survive for many years.
A reform of the legal status of captive insurers has recently been voted in France to create a more favorable tax regime.
This reform follows the Covid 19 pandemic during which many insurers refused to guarantee their policyholders against the consequences of the health crisis. The target today is to facilitate the creation of captive insurers so that medium and large companies can insure themselves against future risks for which they will not find an insurer.