Scary stuff this Solvency II! Especially if you’ve got a captive in the EU or trading into it.
But hold on, let’s not get carried away. Our research shows that most EU captive strategies remain viable albeit in some cases with some re-engineering into cell structures and/or amendments to business plans. Sure, required capital levels have increased, but in many cases captives already have sufficient resources to meet this.
The spectres of increased risk management and governance requirements for EU captives are, with good management support, thoroughly manageable and in many cases do not go significantly beyond existing best practice. Indeed many captive boards and owners are appreciating the increased insight they are getting. And scary stories about huge increases in fronting fees have to date proved unfounded as commercial fronters reassure clients of their continued willingness to front programmers to their captives, even where these are domiciled outside the EU and in non-equivalent jurisdictions.
It’s funny how even the scariest costume is less scary with the lights on!
|This post was part of the special feature about Our Scariest Risks, published October 31, 2011. The feature also included these other risks:|