Singapore is the primary captive domicile in Asia… so why are so few owned by companies from the island state?
There are several reasons behind this – and some misconceptions – which we explore in an article that forms part of StrategicRISK’s Singapore Risk Report. Click here to visit StrategicRISK’s Asia Risk Report hub.
It contains the views of experts such as Marsh senior vice president for communications, media and technology Sirikit Oh; JLT Specialty Asia’s managing director of strategic risk solutions Philip Ondaatje; Daniel Koepfer of NMG Risk Solutions; and Asia Pacific head of customer, distribution and marketing for Zurich Insurance’s IPZ (International Program Zurich) Dylan Bryant.
But in our travels throughout the region, we’ve had the opportunity to canvas the opinions of many other industry experts on the topic of captives, so we thought we’d share some of the brokers’ views with you right here:
Aon Insurance Managers (Singapore) general manager George Ong
“While there has been an increasing interest from the major Singapore-based corporates considering the formation of captives, such interest did not result in a significant growth in the actual establishment of new captives in Singapore. There are a few reasons as to why the growth rate has been slow, mainly because of the protracted soft insurance market conditions and the relatively low level of awareness of captive concepts. However, with greater focus placed on risk management among Singapore corporates, we have seen an increase in the number of enquiries from clients and prospects on how captives could be utilised as part of their risk-management strategy.”
Howden Insurance Brokers (S.) chief executive Jessie Tjioe
“The use of captives in Singapore has traditionally been muted by the general soft market conditions prevalent in the local market, which makes the establishment of captives (in whatever form or structure, i.e. full captive, split-cell) less cost efficient than other more traditional forms of risks transfers (i.e. insurance).”
Lockton Companies (Singapore) head of sales Peter Jackson
“We have seen limited interest in captives. For companies with good claims ratios, the effective cost of capital (rates) from traditional insurance often negates the need for captive solutions. Despite the upside of sharing in the profits from good claims records, companies remain cautious about committing their own risk capital.”
Marsh South-East Asia chairman and Singapore chief executive Alan Cheah
“Singapore remains an attractive captive domicile given the stable and conducive regulatory environment. A number of large, Singapore-based corporations already have captives established here. However, a continued soft insurance market has contributed to the slow establishment of captives by other corporations.”
Asia Willis (Singapore) regional CEO Adam Garrard
“It is right to say that Singapore is the natural hub for captives in the region. Singapore’s competitive advantages – a robust regulatory environment in tune with the needs of the industry, a critical mass of the sets of expertise (banking, legal, insurance accounting, risk management, insurance) required to properly manage and advise client captives, first-class transport and telecoms infrastructure, competitive cost environment – mean it has all the key drivers to remain the guiding force for captives as the insurance market in Asia develops and matures.
“With respect to Singapore-parented companies specifically, a number have captives already. However, while it is a relatively small market by global comparison – measured by GDP or population size – it has many large complex and international businesses and we are seeing captive enquiries from these. Turning these enquiries into formations requires two things. First, ensuring that the full suite of captive benefits is articulated to the client by those with the necessary expertise; captives are a long-term strategic and financial vehicle, and need to be viewed outside the cycle of insurance market renewal and within the parent’s long-term risk-financing strategy.
“Second, there may be some inertia on the part of clients, who have seen regular price reductions in their main programme premiums in recent years. It may be that the latent demand for captives will only be triggered by an uptick in this pricing. However, the more sophisticated clients are already anticipating these inevitable changes by implementing risk-financing strategies, such as captives, that can help them plan and cope ahead of time.”