Bermuda continues to be the domicile of choice for the captive insurance industry, with businesses across the world continuing to use captives for managing their risk, despite a slowdown in the rate of new formations.

That is according to a new report by Marsh Inc., an insurance broker and risk advisor, which looked at 939 single-parent captives globally and found the US and Canada (62 percent of the captives studied) continued to account for the vast majority of the world's captive insurance companies, followed by continental Europe (19 percent), the UK and Ireland (10 percent), and Asia.

The study, entitled '2009 Captive Benchmarking Report: Single Parent Captives - A Global Analysis', revealed Bermuda was the only domicile to be used for captives by parent organisations across all international regions.

Despite accounting for just above five percent of the captives in the study, Asia may be the strongest growth area for captive insurance company formations in the years ahead as the region's businesses become more interested in risk-financing alternatives, it said. Currently, 18 percent of parent companies in the Asia Pacific region domicile in Bermuda.

Marsh found businesses use a number of criteria to determine where to locate their captives, including business purpose, sophistication of regulation and infrastructure, and efficacy of the regulatory authority.

"The prominence of Bermuda as a chosen domicile for organisations in all regions supports this theory, as it has a sophisticated regulatory environment and an infrastructure to support the captive industry," said Jill Husbands, a managing director and head of the Bermuda office for the firm's Captive Solutions Practice. "For US corporations it is also conveniently located, with over 31 percent of companies in the region domiciling here. Bermuda is holding its place as a popular base for captive insurers."

Among industry sectors, financial institutions, health care, and retail were the biggest users of captives, accounting for 20 percent, 14 percent and 11 percent, respectively, of the captives in the study. Businesses of all sizes, in various parts of the world and across almost all industries now own captives. An exception was health care, where most captive owners were located in the US.

"The fact that the US health care system is private and the country is far more litigious than other parts of the world continues to drive the need for captives in this sector," said Michael Cormier, a managing director of Marsh and leader of the firm's Captive Solutions Practice.

The study found captives to be conservative in their investments, both to ensure that they meet regulatory requirements and have sufficient liquid assets to pay future liabilities. At 55 percent, US and Canadian captives invest the highest proportion of their funds in inter-company investments, such as accounts receivable factoring, the purchase of the parent company's commercial paper, inter-company loans, and secured loans with unencumbered real estate and other assets. Captives owned by Asia-Pacific companies invest 45 percent of their funds in this manner, followed by those owned by firms in Continental Europe (37 percent) and the UK and Ireland (34 percent).

To get hold of a free copy of the report visit www.marsh.com and register your details.