Aon’s captive report shows over half of Global 1500 are missing an opportunity

Contrary to popular belief, the captive market remains underdeveloped with over half (53%) of the current global 1500 companies not currently owning a captive, according to the ‘Global 1500: A Captive Insight’ report by Aon.

The outcome is that insurance buyers within the world’s largest companies are failing to achieve a better quality of cover as well as cost savings of typically 10-15%, through economies of scale, efficient use of capital, leverage and more efficient use of senior management time.

According to Aon research, the sectors missing an opportunity include manufacturing and communications, where 55% and 62% respectively do not have captives. Even sectors that have greater take-up still show room for growth. For example, 44% of the largest financial and insurance companies and 39% of mining companies still do not use captives.

Potential captive growth is greatest in Asia where only 17% of Asian G1500 companies have captives; in Japan take-up is just 14%. Even in more mature markets such as the US, 42% of the largest companies still do not own a captive.

Although the report found strong growth in business for US domiciles, in particular Vermont, Bermuda remains the most preferred domicile, with over a quarter (26%) of all registered G1500 captives. In the same way that US companies favour US domiciles, there is an increasing trend for Asia Pacific companies to prefer local domiciles - half of the Asia Pacific captives formed over the last five years were locally domiciled, compared to just 33% in the previous five-year period.

Andrew Tunnicliffe, group managing director, business development, Aon Global Risk Consulting, comments: “The report shows that growth in the captive market is not slowing down – there is still a long way to go before companies are truly managing risk effectively. The message to some specific sectors such as financial services, communications and retail trade is clear – you are missing out on significant cost savings by not using captives as part of your risk management programme.

The captive market is set to grow further. G1500 companies currently have 1,061 captives, as the benefits of captives become clear, I believe that this figure will rise to at least 1,200 by the year 2010.”