Captive owners adjust to changes under new regime

Captive owners have responded to the Solvency II regime in several different ways, including consolidating exposures into one captive or relocating the risks covered in Solvency II-affected captives to other domiciles.

Atlanta-based The Coca-Cola Co. relocated the Canadian pension risk covered in its Ireland-based captive to a new Bermuda captive, Stacy Apter, director of global risk and investments, told attendees at the 26th annual World Captive Forum in Boca Raton, Florida, in January. The Irish captive was traditionally used to access the European markets, but following Solvency II it made sense to move that risk to Bermuda, which was deemed Solvency II-equivalent last year, and consolidate the company’s international pension risk in the new captive at the end of 2016, she said.

“If we look at the move from Ireland to Bermuda, that was absolutely a Solvency II play,” Ms. Apter said.

However, other captive owners have embraced the positive effects of Solvency II, including the diversification requirements encouraging owners to place additional risks in their captives.

Phil Clark, director of insurance for Vodafone Group P.L.C. in the United Kingdom, said his company merged its separate property/casualty and employee benefits captives into one captive last year because of Solvency II, “which is more efficient for us.” The diversification benefit of including employee benefits with the rest of its exposures released about $20 million in capital, he said.

“I quite like Solvency II,” he said. “It does enable you to have that kind of analysis and see … if you bring stuff in, if there’s more reinsurance, what happens to your captive.”