European jurisdictions are seeking more of the captive insurance business, and according to Best’s Review, are starting to see the benefits.

Europe still has a small portion of the world’s 6,000 captives, but jurisdictions there are not consistent in how they report captive numbers, even though more captives were thought to be newly licensed in 2022, than the number of those closed.

The hard market push saw Guernsey retake the top slot among European captive domiciles, followed by Luxembourg and the Isle of Man.

The article added that even larger European countries that had not traditionally sought the business, were now doing so.

France, Italy and Britain are considering ways to enhance their attractiveness as captive domiciles.

London is exploring the idea of adopting a captive insurance framework, as part of the London Market Group’s road map to “improving the business environment for risk transfer in the UK”.

“Captive insurers are being used increasingly by companies, but currently none are being domiciled in the UK, which is not seen as an attractive location,” the London Market Group said in a recent report as it encouraged new regulations.

Best’s Review also noted that Hong Kong’s government had cited captive insurance and insurance-linked securities as “among its financial services priorities as it released its 2024-25 budget”.

“We welcome the 2024-25 budget and are ready to provide sophisticated risk management solutions for large corporations with a global footprint,” Hong Kong Insurance Authority chairman Stephen Yiu said in a statement.

Meanwhile, a new corporate income tax, a 15 per cent levy on multinational groups with combined annual revenue of €750 million (about $811.9 million) or more, goes into effect next year.

Best’s Review said the new tax could create some anxiety for larger captives in Bermuda, but said the number considering moving would be small.

“With as many captives as we have in Bermuda, it is natural for some to be nervous about the potential increase of their operating costs,” Tanja Korff, senior vice-president of Marsh Management Services (Bermuda) Ltd was quoted as saying.

“However, based on our clients’ reaction so far, the number of those captives considering a move from Bermuda is minimal.”

Jason Palmer, director of captive and insurance management solutions at WTW who is based in Vermont, told Best: “I don’t think that the establishment of a corporate tax in Bermuda is going to shift that competition.”

Allan Autry, a partner at Johnson Lambert, was quoted: “It should not beat up on the smaller multinational groups doing business in the country.”

The article said an important element in attracting and keeping captives was a regulatory consistency and a network of brokers, reinsurers and third-party administrators.

“Bermuda’s viewed as a jurisdiction where there are, what I will call, honest brokers and interested regulators, which makes it a place that folks like doing business, because they know what they’re getting there,” said Mark Bradford, a partner at the law firm Duane Morris.

AM Best Director, Dan Teclaw stated in the article: “Tax is not the primary consideration in picking a domicile.

“I think it’s more about the jurisdiction and the regime and the ability to cover the type of losses in lines of business if they want to, within a captive formation, more so than the actual tax considerations.”