Experts offer their insights through "Captives Uncovered"

Tuesday 10 March 2015

Changes within the captive insurance industry, as captives look for new market opportunities, have been highlighted by Barclays latest ‘Captives Uncovered’ insights initiative.

This is the third year Barclays has published its "Captives Uncovered" series offering frank insights into the captives sector from local experts.

The bank has spoken to a range of clients from the industry and captives experts within Barclays for a closer look, through their eyes, at the issues affecting them today.

Featuring a dedicated website and a LinkedIn networking group, ‘Captives Uncovered’ aims to help captives professionals exchange views and information online and learn from industry experts.

Six interviews have been published on the Barclays website, with expert opinion from captive managers based in Guernsey, Jersey and the Isle of Man.

Lisa Wall, risk finance practice leader for Lockton Companies, David Riley, senior vice president for Marsh Management Services and Richard Drinkwater, managing director for Castletown Insurance Services Limited took part in the interviews giving their thoughts on geographical trends, Solvency II and where they see the captive insurance industry being three years from now.

Simon Phillips and Colleen McHugh, from Barclays’ own captive insurance team, also feature.

“The captive insurance industry has faced big changes over recent years and as the industry turns a corner it’s been really valuable to undertake these interviews again to provide the latest insights into the opportunities and challenges within the industry,” said Simon Phillips, Head of Captive Insurance for Barclays.

“Regulation, innovation and good governance are all key trends the interviews explore and it’s great to get the thoughts from a range of experts from across the industry.

“There’s a lot of demand for Insurance-Linked Securities (ILS) and we’re seeing more and more ILS structures being put in place on a month-to-month basis and it’s still a growing market.

“I’ve also noticed an increasing engagement from shareholders and parents who ultimately own the captives. It’s fascinating to see how they’re looking not only at new ways to use their captive but also how it can be more efficient too.”

Ms McHugh, captive insurance investment adviser at Barclays, highlights how captive companies can improve their returns and the impact rising interest rates could have on captive insurance assets in her interview.

“For a captive to become a profit centre for its parent it needs to focus on the assets and make them work harder.

“Premiums build up within the captive and are only paid out in the event of a claim. Depending on the type of risk the captive is underwriting, short tail or long tail for instance, those assets can be invested outside of cash to try and maximise returns. However, the degree to which a captive becomes a profit centre for its parent is ultimately determined by the parent.

“Rising interest rates will be good for a captive’s cash assets. Balances held on call or term deposit with banks will earn more interest. The reality though is that rates will rise far too slowly and at such small increments to merit any benefit. When all is said and done though, central banks appear in no hurry to raise rates.”