Analysis of captive domiciles in the APAC and MEA regions, based on data from the 2023 World Domicile Update

KEY NUMBERS

2021 captives: 193

2022 captives: 201

2022 approvals: 16

2022 surrenders: 8

Net difference: +8

Growth rate: 4.15%

Surrender rate: 4.15%

2021 estimated premium: $5,517,000,000

2022 estimated premium: $5,816,000,000

Premium change: $299,000,000

2021 premium per captive: $28,588,000

2022 premium per captive: $28,933,000

The emerging Asia-Pacific (APAC) and Middle-East and Africa (MEA) markets make up a small slice of the global captive industry, although there is evidence captive activity is ramping up, particularly in MEA.

Four out of the five captive domiciles in MEA approved captives, and premium substantially increased. A large portion of the captive premium in these markets is attributed solely to South African captive cells.

According to the South African Reserve Bank’s latest Prudential Authority Annual Report, in 2022 the country’s five life captive cells wrote R16.7 billion, and its six non-life captive cells R30 billion, totalling around R46.7 billion ($2.5 billion).

This is a stark contrast to 2021 when five life cells wrote R13.9 billion and seven non-life captive cells wrote R28.5 billion for about R42.5 billion ($2.3 billion).

In addition, South Africa’s non-cellular captives increased premium from around R1.1 billion ($72 million) to R1.5 billion ($93 million), and Dubai captives increased premium from $36 million to $60 million as MEA premium was estimated to have risen to $2.7 billion in 2022, from $2.4 billion the previous year.

APAC

In APAC, the performance was more moderate with captive premiums projected to have remained stable in 2022 at $3,082 million (2021: $3,085 million).

This projection is somewhat limited due to lacking Singapore’s 2022 captive premium figure, and it’s worth noting Marsh did report in its 2023 Captive Benchmarking report a 46% uptick in premium growth among its Singapore-domiciled clients between 2020 and 2022.

However, in other APAC countries captive premiums did reduce, notably in China by about $35 million.

And even in Labuan, which had the most new formations in the region, with four captives plus a cell captive approved, the premium only grew by $2 million.

The APAC region had a total of 12 new formations overall, and net growth in captive numbers of six.

Strategic role

However, George McGhie, strategic adviser for Asia Pacific at Artex, is positive about the progress being made in the region and says he looks past the number of captives when considering growth and focuses on how captives are being used.

“I think [captives] are being used in far more significant and strategic ways than may have been the case in the past – as they help clients come to terms with rapidly developing risk and insurance market challenges,” he says. “Singapore and Labuan have solid client bases but in terms of captive numbers there’s a big gap to the established domiciles either side of the Atlantic. However, as their captive sectors are part of a broader objective for their international financial services, development is probably better defined in those terms.”

Captive-related developments have helped in that goal, McGhie adds, such as insurance-linked securities (ILS) in Singapore and PCCs in Labuan – an area McGhie thinks Singapore should also develop to support both captive and ILS growth.

“The focus is less on outright captive numbers than on the role captive techniques can play in more sophisticated approaches to risk finance in the face of ongoing challenges,” he says. “The need for experienced providers of advice and services in support of those developments, will definitely support overall growth.”

Attractive offering

The Pan-Asia Risk and Insurance Management Association is supporting the formation of a new APAC captive owners association this year, starting with a Singapore chapter and then expanding into other domiciles.

McGhie says this will provide much needed peer-to-peer support for existing and potential captive owners.

With this, he believes it can build on the strong local infrastructure in the region, including local and global insurance and reinsurance markets, managers, accountants and experienced consultants.

These features, he says, are attractive to captive owners wherever the parent is based. For these reasons, he is positive about the role of the region’s domiciles and their captive offerings for clients globally.

“The focus of countries like Singapore with its recently developed MAS Global Asia Insurance Partnership initiative is on providing services to support the risk needs of organisations, wherever they are based,” he adds. “Captives and related techniques are a key component of potential solutions and will continue to receive support and investment in the key sectors. There will also be an increasing focus on sustainability in risk finance, and Singapore is very much a leader in this regard.”