Despite changes to regulation, accounting standards and taxation, captives have a bright future. That was the verdict from delegates at the Federation of European Risk Management Associations (FERMA) conference.
Senior vice president of Marsh Management Services, Frederick Gabriel said that with nearly 50% of risk managers planning to develop existing captives, the renewed interest in captives since September 11 had been sustained.
Gabriel said that captives are being use to house increasingly complex risks. "More and more we are seeing workers compensation and employers' liability being put into captives."
He said that the failure of insurers to develop new products, coupled with insurer and reinsurer credit downgrades would mean that despite the additional administrative burdens, the use of captives would continue to increase.
But he said that new products combining insurance and other types of financial products were "in the pipeline". "There's certainly a need for innovation and flexibility."
Gabriel said that future developments in captives could involve more industry pooling and more direct writing captives.
Risks that business could consider putting into their captives in future include corporate fraud, weather related risks, terrorism, product contamination and recall and future raw material prices.
