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Emerging markets spur captives growth: Report


The use of captive insurers is likely to grow as investment in emerging European markets and in Asia increases, according to experts from Aon Captive Services Group, a unit of Aon Corp.

In particular, growth in captives is likely to stem from the expansion of European corporations into emerging markets such as Russia and other countries in Eastern Europe, as well as from an increase in European and U.S. companies developing business in Asia.

Aon last week published research into captive use among the Global 500 group of companies--the world's 500 largest companies based on revenue.

The study found that three-quarters of the Global 500 companies currently operate captives, but that there is still scope for greater captive use.

Among studied companies in Europe--where the concept of captive use is well established--78% have a captive.

However, there is "relatively low takeup" of the captive concept in Italy and Germany, noted Andrew Tunnicliffe, managing director in Aon's IRMG unit.

In Germany, just 66% of large corporations have a captive, according to the research, which is due in part to the historically close relationship between companies and their insurers, said Mr. Tunnicliffe.

There is, however, growing interest among German companies in using captives, noted Stephen Cross, chief executive officer of ACSG, and Malta is a favored domicile among such companies because of its European Union member status, as well as its beneficial tax environment.

Asia is one area where Aon expects to see huge growth in captive usage, according to the experts.

At present, only 27% of the Asia-based members of the Global 500 have a captive, according to the research.

Much of the overseas investment going into growth areas, such as China, is in the form of joint ventures with local companies, said Mr. Cross.

European or American companies investing in such areas likely will want to apply the same standards of risk management and corporate governance to such ventures as to their wholly owned business, he said.

Aon would, in such cases, typically advise joint venture projects to set up captives separately to either of the partner's current captives, in order to keep that business separate, he said.

Copies of the report can be acquired by contacting Carrie Leach at carrie.leach