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Lloyd’s, UK propositions further legitimising captive concept – Thomas-Ferrand

While the Lloyd’s Captive Syndicate proposition is mostly appealing to the largest, most sophisticated clients it provides an environment for insureds to future proof their risk financing strategies, according to William Thomas-Ferrand, international captive practice leader at Marsh Captive Solutions.

Speaking to Captive Intelligence while attending the Airmic and GIIA Guernsey Conference on 25 June, Thomas-Ferrand said the captive manager was “incredibly proud” to have been part of the infrastructure and community in Guernsey for half a century.

Marsh is celebrating its fiftieth anniversary on the island and Thomas-Ferrand felt the conference was ideal timing considering the rising popularity of captives.

“Captives going mainstream, as Airmic as explained so well the past two years, is a big driver of them becoming more strategic risk financing vehicles,” he told Captive Intelligence.

“The increasing demand for captives from parent companies in all countries is what is leading to the development of new domiciles, as we have seen so successfully in France.”

Lloyd’s potential

While the United Kingdom’s captive framework plans remain on hold as the country awaits the general election outcome on 4 July, Marsh has already helped to establish the first new Lloyd’s Captive Syndicate this century.

Captive Intelligence reported earlier this month that Marsh had worked closely with a large technology multinational and Apollo Syndicate Management Ltd to form Captive Syndicate 1100.

“The challenge at Lloyd’s is that it is quite a sophisticated environment and captives, at least at their outset, are usually designed to be quite straightforward,” Thomas-Ferrand said.

“By partnering with the client and with Apollo on the syndicate management, we can balance the Lloyd’s infrastructure with the captive technology that is needed to manager sophisticasted captives.

“Apollo brings that understanding of the Lloyd’s environment, the reporting required and what’s expected from the managing agent, so in partnership with our captive knowledge, experience, technology and consulting it creates a successful union.”

Thomas-Ferrand believes Lloyd’s will be an effective solution for large multinationals and he has seen several potentially exciting use cases.

“There will be more to come, but prospective entrants will want to look and watch how this first one works out,” he added.

“There is not going to be a mad rush, but I expect there will be a trickle of clients that will want to use Lloyd’s. I believe Lloyd’s will be quite strict in who they accept. They want the leading companies in the world and that’s a great stance to have.”

While the cost and perceived complexity of Lloyd’s ensures it is likely only appealing to the largest clients that are looking for extensive utilisation, Thomas-Ferrand said he believes establishing a Captive Syndicate can “future proof” a company’s risk financing and insurance strategy.

“Do you set up a captive for your needs now, or your future needs?  I think with Lloyd’s it is a strategic direction in which you can take your risk financing,” he explained.

“The ability to use the licences all over the world, the strong rating. These are incredibly appealing and valuable tools. They don’t have to be utilised immediately, but it provides the insured with incredible opportunities and negotiating positions that might be useful in the future.”

UK captives & competition

In the UK, Marsh is still hopeful that a new government will push forward with the captive consultation that was originally promised in spring.

The captive manager will be supporting the London Market Group’s post-election letter planned to be delivered to the next Chancellor on 5 July.

“The election brings some uncertainty to the UK captive regime, but we still see clients interested in the UK option despite not knowing if it will be developed,” Thomas-Ferrand said.

“There may be a willingness to assess new options for existing captive owners, but what is more exciting for me is the potential of new prospective captives emerging because they can do it ‘at home’.”

The majority of France’s new captives formed over the past 18 months since a captive framework was introduced has come from new entrants rather than re-domestications.

“I had a recent meeting with a British company that does no business overseas and is struggling with its insurance,” Thomas-Ferrand added. “They’d never considered captives because they would have to use an offshore location, so it opens the door to companies that haven’t felt able to use a captive before.

“We have seen with the amount of American states that have introduced captive legislation the last 15 years, it has proliferated the amount of captives.”

Established domiciles such as Guernsey, which has historically been a go-to jurisdiction for captives owned by UK businesses, are naturally monitoring closely the developments both at Lloyd’s and the wider proposed UK captive regime.

While Guernsey is popular with UK organisations, it is also home to captives owned by businesses from all the world – from the Asia Pacific and South Africa to Scandinavia and the Americas.

“I wondered if there would be an incredibly defensive attitude of the market position Guernsey has developed over such a long time,” Thomas-Ferrand said. “Whereas actually it is being embraced and welcomed as legitimising the captive concept.  We can learn a lot from the US that the increase in options leads to a greater utilisation and take-up of captives by everyone.”