Captive insurers in EU to benefit from new Solvency II Directive

The majority of EU-domiciled captive re/insurance companies should fall under the “small and non-complex undertakings” (SNCUs) criteria that should benefit them and their parent firms from improved proportionality under the revised Solvency II Directive, according to FERMA.

The federation has issued its third EU policy note outlining how improvements to the Principle of Proportionality (PoP) can benefit captives domiciled in EU member states.

FERMA believes the introduction of SNCUs will bring more consistency across EU Member States and more predictability, as the revised text sets out clear criteria any re/insurance undertaking should meet in order to be classified as SNCU by their national regulator or national competent authority (NCA).

Captive companies classified as SNCU should benefit from proportionality measures on reporting, disclosure, governance, revision of written policies, calculation of technical provisions, the own risk and solvency assessment (ORSA) and the liquidity risk management plan, FERMA said.

The majority of captives domiciled in EU Member States are expected to meet the SNCU criteria in Article 29a or via the captive-specific derogation. 

“Holding captives to the same regulatory requirements as large, diversified insurers places excessive administrative burdens and costs on such entities, reducing their overall effectiveness and efficiency,” said Laurent Nihoul, board member and chair of the Captive Committee, FERMA.

“Proportionality is a significant development for the European captive (re)insurance market and has been a critical objective for FERMA in recent years,” he added. 

“Captives are an essential part of a vibrant and competitive EU insurance market,” said Typhaine Beaupérin, chief executive of FERMA, “enabling parent companies/groups to have greater control over risk management strategies and insurance coverage. These capabilities are particularly important at a time when the risk landscape is evolving rapidly with new risks emerging, including those related to the Net Zero transition.”

FERMA Forum Today is in partnership with Captive Review, part of Newton Media.

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