As insurers increase their prices and are more cautious with large companies, they are encouraged to look for alternatives to manage their risks. Bercy is working on locating captives in France, often based abroad.
The covid-19 crisis could boost the development of captives, insurance or reinsurance companies created by companies internally to better manage their risks, according to brokers and risk management professionals.
Around 120 French companies, and most of those in the CAC 40, are now equipped with an insurance captive. However, “ given the conditions of the insurance market, many manufacturers are wondering about the advisability of boosting their captives and transferring to them risks which, today, are not insured or whose insurance prices have become prohibitive “,explains Hervé Houdard, vice-president of the management board of the commercial insurance broker SIACI Saint-Honoré.
After years rather favorable to large companies, insurers have decided in the wake of the covid-19 crisis to increase their prices, to revise the deductibles upwards or to reduce the amount and scope of coverage, depending on the experts. They do not hesitate to speak of a market reversal even if the year 2019 had already been marked by price increases.
Reflections on the interest of captives are not new. But the current turn of the screw by insurers encourages companies that do not yet have to think about acquiring such a tool. “We are now more and more solicited, whether or not by members in logistics, automotive, agribusiness, distribution, etc., who get information from us on how to take captives”, assures Oliver Wild, the president of the association for the Management of Risks and Business Insurance (Amare), representing large companies and mid-sized companies.
Attractive schemes in Luxembourg
Acquire such a tool in the midst of a crisis “Remains possible, nevertheless the companies which obtain an optimal result are those which had taken advantage of the more favorable years to set up their captive”, notes Fabrice Domange, director of the insurance broker Marsh in France. “ Creating a captive is not that easy, also underlines Hervé Houdard at SIACI Saint-Honoré. Interested companies are not necessarily going to create a captive right away ”.
The candidates are monitoring the work carried out by Bercy, which has said it is ready to facilitate the installation of captives in the territory. Most of the groups concerned by a captive have indeed preferred more accommodating destinations, in particular for tax purposes, such as Luxembourg and Ireland. Today, only a handful of French companies such as Veolia, Dassault Aviation or, since last year, Worldline have chosen to have such an instrument in France. ” In France, a captive should be allowed to provision more, faster on exceptional risks and I think everything else will follow. », Judge Brigitte Bouquot, vice-president of Amrae.
The context is promising. Since last spring, Bercy has been working on setting up solutions likely to help companies affected by events such as a pandemic. Faced with the reluctance of companies, Bruno Le Maire admittedly ruled out in December the idea of creating compulsory pandemic insurance. On the other hand, the government indicated that legislative measures would be adopted this year so that companies can constitute provisions, benefiting from an advantageous tax regime, in order to have financial reserves capable of cushioning hard knocks.