Understanding the changing captives landscape in Europe and how to take advantage

The European insurance market is facing a period of stabilisation in premiums for several risk classes, however this factor did not stop continued growth in the global and European captive insurance market.

Establishing captives emerged as an increasingly popular strategy, complementing conventional insurance by allowing organisations to create entities to self-insure their risk.

According to Business Insurance, captives now account for 25% of the global commercial insurance market, driven by high price, restrictive terms, and limited capacity from traditional insurers. This trend has invigorated the captive industry in Europe, which is increasingly supported by favourable legislation and regulatory frameworks.

The growing captive trend across Europe could inspire more countries in the continent to introduce their own captive legislation in the coming years. Meanwhile, we’re seeing firms with existing captives exploring relocation options to best align with their evolving risk profiles and the potential advantages of newer domiciles.

To help you understand changing conditions for captives in Europe, in this article, we run down the key existing and emerging domiciles for consideration in your next captive move.

Existing European captive domiciles

• Luxembourg remains the largest captive reinsurance hub in the EU, with 195 reinsurance captives at the end of 2023.^[1] Its strong regulatory framework, managed by the Commissariat aux Assurances (CAA), and attractive equalisation provisions ensure its continued appeal.
• Ireland, with 65 captives at the end of 2023, has built a robust financial services ecosystem over three decades since the first captive license in 1989.^[1] It applies Solvency II regulations proportionately via the Probability Risk and Impact System (PRISM), making it a favourable choice for both direct insurance and reinsurance captives.
• Malta distinguishes itself as the only EU member state offering Protected Cell Company (PCC) legislation. PCCs provide cost-effective, Solvency II-compliant solutions and direct EU market access. By 2023, Malta hosted 21 pure captives and 79 captive cells.^[1]
• Switzerland, though outside the EU, offers streamlined processes for establishing reinsurance captives. Its Swiss Solvency Test (SST) aligns with European standards while simplifying requirements for captives. By December 2023, Switzerland had 25 captives.^[1]
• Guernsey, Europe’s largest captive domicile, housed 199 pure captives and 123 cells by early 2024.^[1] Not bound by Solvency II, Guernsey offers flexibility and innovative frameworks like its pre-authorisation scheme for insurance cells, supporting rapid captive formation.
• Gibraltar, with more than 50 years’ of experience in captive insurance and its first captive establishment in 1967, had 10 captives and 27 cells at the end of 2023. Gibraltar is developing a post-Brexit ‘dual captive regime', with the hope that this new framework would allow Gibraltar to continue operating its UK-facing business, while also making the most of this new opportunity for growth and giving greater flexibility for international business.
• Isle of Man supports various structures, including PCCs, and provides proportional solvency requirements alongside infrastructure for loan-back arrangements. As of early 2024, the island hosted 90 pure captives and seven cells.^[1]

European domiciles enhancing captive environments

The captive insurance boom is prompting several European countries to enhance their regulatory environments for captives:

• France introduced pro-captive legislation in 2023, facilitating the creation of captive reinsurance entities. By end of 2024, France had around 20 active captives, reflecting the success of its favourable regulatory framework.
• Italy has started granting captive licenses and is witnessing a trend of repatriating captives previously domiciled abroad. Although Italy lacks specific legislation, we anticipate less strict governance standards to be introduced, encouraging further captive development.
• The UK is exploring captive frameworks as part of the London Market Group’s roadmap to improve risk transfer solutions with the aim to position the UK as a leading domicile.
• Sweden has become a notable captive hub, with 30 captives by end of 2023.^[1] Though it lacks specific legislation, Sweden’s regulatory framework under Solvency II has proven sufficient for captive operations.
• Countries including Germany, Netherlands, and Spain are yet to develop dedicated captive legislation. However, local activity hints at potential growth as organisations explore captive solutions to manage complex risks.

Preparing for continued growth of captives in Europe

The European captive insurance market is poised for further evolution and expansion. This means understanding the best domicile for your captive could prove a key topic for more organisations.

Your ability to make agnostic comparisons between domiciles when it comes to reviewing and setting up new vehicles could be key to the business meeting efficacy and risk financing goals. Managing this process efficiently as the landscape continues to shift at speed could well demand calling on external expertise.

To assess whether the domicile of your existing captive continues to be the best as well as the most aligned to your business objectives or to gather agnostic comparisons between domiciles when it comes to setting up your new captive, get in touch.

Footnote

1. World Domicile Update 2024 now available online! Return to article undo

Contacts

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Vittorio Pozzo

Director, Europe & Great Britain
Captive Advisory Team
Alternative Risk Transfer

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Lorenzo Orsini

Analyst, Europe & Great Britain
Captive Advisory Team
Alternative Risk Transfer

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