These should be good times for the captive insurance sector and
for other self-insurance arrangements. After the longest
'soft' market in recent memory (a time when insurance
capacity exceeds demand and thus depresses premiums), the insurance
and reinsurance markets have finally begun to turn and harden, with
premium rates rising across most business lines. When insurance
prices rise, large corporate insureds will look to contain their
insurance spend by retaining more risk, including through the use
of captives and other self-insurance arrangements.
Many of the key domiciles for captive insurers are offshore,
with Bermuda, the Cayman Islands, and Guernsey being the leading
jurisdictions. While these jurisdictions should be gearing up for a
growth in captive formations, a mild chill has spread over the
sector as a result of uncertainty over the impact of the European
Union's so-called "economic substance" requirements.
These requirements are designed to eradicate
