Asian corporates warm to captives, but local expertise lags

Corporates in Asia are setting up more captive insurers, but a shortage of local expertise is holding the vehicles back, panellists said at the PARIMA Singapore Conference on 15 October. 

“There’s definitely more interest,” said Kelvin Wu, head of risk management at International SOS and president of the Singapore Captive Insurance Association (SCIA), who moderated a panel on captives during the conference. 

Singapore is home to close to 90 captives, up from 79 in 2021, according to data from the SCIA and the Monetary Authority of Singapore (MAS). Yet only 5% to 6% of global captives are owned by Asian parents, MAS executive director Lim Cheng Khai said in July. 

Wu said that the region’s ecosystem had yet to catch up. “It’s hard to set up a captive if you don’t have the actuarial expert, the claims expert, the insurers who are used to working with captives in this region,” he said. 

MAS launched a consultation in July on a protected cell company (PCC) framework, which could allow smaller firms to rent cells in shared captive facilities, addressing cost and complexity challenges associated with setting up separate legal entities for individual risk-transfer programmes. The structure would be open to licensed entities carrying out captive insurance, issuers of insurance-linked securities, and sovereign risk pools. 

If implemented, the framework would make Singapore the second jurisdiction in Asia, after Labuan, to allow PCCs. “There are only so many domiciles in Asia that are allowing captives,” said Wu. 

Captive advantage 

The rise in captive interest comes as the share of risks that are “readily transferable via established insurance products” falls, said Wu. “If I look at the risk mapping that I do for [International SOS] and the percentage of the risk that are necessarily insurable or transferable, I would argue that the trend is probably reducing.” 

This shift is likely happening due to the rising value of intangible assets, said Christopher Beazley, chief commercial officer at SCOR Business Solutions. The market value of intangible assets rose to 92% of the market value of the S&P 500 in 2025, according to a study by consulting firm Ocean Tomo. “If you look at how many ready-made solutions there are to insuring intangible assets, it’s not so great,” said Beazley. 

Geopolitical risks are also pushing multinational firms to set up multiple captives in response, Wu said. “It’s a bit of a reflection of the current geopolitical environment.” 

Captives allow buyers to negotiate multi-year, multi-line structured cover, rather than being “just a primary risk transfer target,” Wu said. “We can then now work with the insurer maybe to say take on more structured risk financing, across multiple lines to protect out the volatility of my balance sheet.” 

Having a captive moved conversations from “how much insurance am I buying” to the cost of insurers’ capital versus the company’s balance sheet, said Wu. “[That is] usually quite quantifiable, which actually gives you a more structured conversation.” 

But risk managers will have to accept that they are “running and owning an insurance company”, and that comes with many considerations, he added. “Often, that’s the part that scares people off.” 

Asian captives often sit behind high country retentions, leaving owners unaware of losses below them, said Sebastian Stuhlfauth, international business development director at Sedgwick. “So it’s making sure that you actually capture claims below those retentions… and then you can manage that,” Stuhlfauth said. 

Quite often, captives are not fully integrated, Stuhlfauth said, complicating risk management. “The captive needs to be a part of the risk management, not just a separate insurance company that I use if the market is hard,” he said. 

Boards need to integrate captives into the risk management strategy, and use them through the different cycles of the market, within the different lines that need to be insured, he added. “Even if they don’t run through the captive, that discussion should be a holistic one, and the captive should be considered throughout.” 

Insuring the hard-to-insure 

Companies are increasingly using captives for risks the conventional market will not fully cover, panellists said. 

Captives in Asia are most often used for cyber, logistics and supply chain risks, said Javier Mirabal, chief technical officer at RCG-Risk Consulting Group. Firms often first use captives to manage deductibles and predictable losses, then to finance risk across the balance sheet. At the most advanced stage, they use their own capital to design cover for strategic risks that no standard product fully insures, he said. 

“You create your own product in order to cover, totally or partially, the risk that you need to [finance],” he added. “In this case, you need to be sure that your regulator accepts the type of risk products that you want to design.” 

But without loss history, pricing these risks can be difficult. “I remember peers who were doing that with cyber risk 15 years ago, where the cyber insurance market was perhaps less mature, and a lot of peers were integrating cyber exposure within the captive without really knowing what the exposure was,” said Wu. “I’m not sure we are necessarily better at quantifying that exposure, but we have a bit more data.” 

Where the data is thin, actuaries build scenarios tailored to the company rather than relying on historical losses, said Reshan Sivasamy, actuarial director at Aon.

“From an organisation’s point of view, we’ll help you understand what that means looking forward: what your losses could look like based on experience, but also applying forward-looking analysis if there’s a change in exposure,” he said. “So you can look at what is your total cost of risk if you were to retain the first [US$]5 million layer, or [US$]10 million depending on your risk appetite.” 

Don’t sell your house 

Captives often get a lot of attention in a hard market as firms seek to save premiums, but “there’s never a right time to set up a captive”, said Sivasamy. 

“In fact, in a soft market, if you already have a captive set up, then you can look at optimising that captive, whether the structure you have in place, [and whether] this still applies now,” said Sivasamy. “Is it the most optimised structure you have in place? Do you buy cheaper limits now? How is your exposure changing from an analytical point of view?” 

Wu said chief financial officers value predictability as much as cost savings, and warned against pulling capital out of a captive when the market softens. “I would argue that business generally more often than not likes the predictability than the cost, depending on the situation,” he said. 

Mirabal agreed. “If you buy a house, what happens if the rent lowers one day? Do you sell your house and move to rent?” he said. “You cannot get a captive and start moving [risk] all year because the market is soft, the market is hard.” 

Beazley said SCOR does not see captives as a threat to its business. “There seems to be no shortage of risk in the world to go around right now, and I don’t see that changing in the foreseeable future,” he said. 

SCOR adjusts its own reinsurance buying to market conditions and expects captives to do the same, he said. “There are market realities, in the same way that any insurance buyer moves through a hard and softening market… and as a carrier, we totally understand the market dynamics.” 

Owning a captive is a strong signal that a firm has “skin in the game”, he added. 

“Does someone look after a house that they own better or worse than somebody who’s renting a house?” he said. “I think [owning a captive] really helps to embed a strong risk management culture through an organisation as well.”