In the post-Enron era, the complex world of offshore subsidiaries is coming under scrutiny from many different sides, analysts, legislators, shareholders and even company directors.

In a forum on captives at the World Insurance Symposium being held at the Fairmont Southampton Princess, panellists were asked yesterday what they thought the future held for the captive industry.

Participating in the discussion was moderator David McManus, president Arthur J. Gallagher & Co. (Bermuda) Ltd., Richard Irvine, director Pricewaterhouse Coopers, Dave Brining, executive vice president property and casualty operations, Max Re, Henry Good, director of insurance for Rohm & Hass Company, and replacing Robert Mulderig, chairman and CEO of Mutual Risk Management was Peter J. Mullen, president of Artex Underwriting Managers Ltd.

Mr. McManus asked the panel members to look into their crystal balls and offer their views on the future of the captives market and the overwhelming view was that the industry would not only prevail, but may in fact prosper.

Mr. Irvine said: “I think that companies are continuing to obtain risk on their balance sheets and that the prudent CFO will try to do that in the most tax efficient manner,” and he said the operating company that retains risk gets no tax benefit.

He also said there was an advantage to an insurance company that obtains risk and they would seek it out.

Mr. Irvine's view was that captives would continue to be part of doing business.

Mr. Mullen said: “Breaking it down to the different segments of the market place, single parent captives and global association captives, I think that in the middle market, there could be some growth in group captive arrangements, whereas middle market clients are looking for alternative market solutions.

“I see agency captives staying flat, new ones will be formed and others will go away because of the lack of capital. In the last couple of years, the rent a captive as a solution has really been used more and more.”

He said that more captives were ending up in rent a captive arrangements now as it seemed, at least from an accounting perspective, that it is a little easier to get induction, further premium than from a single parent captive.

As far as the future of captives, Mr. Mullen said he was balanced.

He saw a future for captives, but didn't think there would be a flood of new captives.

He said: “Captive arrangements could grow without there necessarily being a significant increase in rent a captives.”

Mr. Brining said: “I think companies are going to be forced to retain more risk and because of that they will seek the most efficient mechanism to transfer that risk to other groups of captives.”

And he said he believed more captives would be formed and more premiums put into the captive economy.

Mr. Good, who said in the session that Rohm & Hass had two captives purely for tax reasons, said: “My prediction would be unless there is a change in US tax law from what it is today, there will be a flood of new captives, not necessarily in Bermuda, but in all the other captive entities out there.

“You can't afford not to do it for tax reasons, so there will be a flood of new captives.”

The symposium concludes this morning with an open assembly in which forum attendees voice their opinions regarding the future of the industry.

A live webcast, as well as archived discussions can be accessed through www.bis.bm.