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Captive market thriving: Marsh

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The captive market continues to thrive but growth in Australia is limited, according to a new report from Marsh.

Captive insurers are established by a company with the objective of covering its specific risks.

Marsh Managing Principal Chris McGuiness told the Australian captive market is relatively mature.

“Large Australian companies have been pretty involved in the captive industry for many years,” he said. “Those that want them have them, so growth is limited.”

Very few captives are based in Australia, due to the regulatory environment.

Of the 1109 captives managed by Marsh, Bermuda has 270, the US state of Vermont 192, the Cayman Islands 110, Dublin 98 and Luxembourg 64.

Emerging markets such as China will contribute to global growth, says the report.

Hong Kong is setting itself up as a captive domicile, with three captives in place and short-term ambitions for more than 20.

“As a result, we expect to see tremendous growth, with Chinese companies forming captives for access to reinsurance, property coverages, and a more disciplined risk management approach.”

Captive domiciles are also flourishing in the European Union under Solvency II, and there is an “explosion” of small captives in the US. 

The use of captives for non-traditional risks, such as political and cyber, is growing substantially.

“More and more, business-owners are finding that having a captive is a strategically important corporate asset, because it effectively raises the visibility of risk management costs and serves as an excellent control tool,” the report says.