Hardening market conditions and emerging new issues are driving an interest in existing and new captive insurers. As a result, the organisers of June's 5th Annual International Captives Congress, ICAP 2001, are expecting a record number of delegates and have set an extensive agenda of topical discussions for risk managers and Bermuda captive managers to discuss.

President of the Bermuda Insurance Management Association and president of Liberty International Management (Bermuda) Ltd, Michael Hardy, said that more jurisdictions are accepting the captive concept as an alternative to traditional insurance market products. “It's becoming more accepted by regulators, as they become more comfortable with the approach,” he said. “That's been evidenced recently by new captive formations in jurisdictions that have not been previously known for captive insurance.

“And increasingly, companies are making a distinction between onshore and offshore domiciles, depending on their programme requirements. Some feel forced into going one way or the other, while others are in the beneficial position of being able to choose based on what's best for their programmes.”

While a number of companies are being formed under Bermuda's landmark Segregated Accounts Companies legislation, there has been a lot of interest over the last year in agency rent-a-captive programmes.

President of SINSER Management Services (Bermuda) Ltd, Nick Dove, commented, “Attendance has been noticeably up at captive insurance conferences, with more people seeking information on captive insurance. In our office, we see a lot of interest in agency rent-a-captive programmes and we've had a lot of enquiries regarding pure captive companies. There's no question that the hardening market has re-focused attention on the captive concept.

“There are now fewer firms providing reinsurance to captives, as a result of consolidation, and other structural changes in the market saw two significant providers of reinsurance capacity removed from play. I believe there are definite opportunities for others to provide this specialty reinsurance for captive programmes. There is really only one company in Bermuda providing that at present.”

David Pickering, executive vice-president of International Advisory Services Ltd (a member of the MRM Group), commented that “the general hardening of the market has impacted the reinsurance coverage. Captive reinsurance pricing is going up and the terms are becoming more restrictive.

“We have also seen gaps in coverage in commercial market programmes. There sometimes isn't the capacity, and what capacity there is has come at a higher price. So people are using their captives to plug the gaps, and are also putting more capital into their captives to allow them to do that.

“Industry captives are showing a revival after the protracted soft market, where very few new participants were being attracted. Now, there is an increase in enquiries to join existing industry captives.

“And as for agency captives, agents are being required to put more capital at risk by the fronting companies, in order to support their programmes. Those able to do that can take advantage of the enhanced underwriting income generated from the higher rates being charged on the underlying programs.”

David Fox is director of information services at the Bermuda Insurance Institute.