Growth and transformation: the regulatory forces shaping captives in Europe and beyond

A decade ago, France was just emerging as an onshore captive domicile, with only six captives domiciled there. Fast-forward to today and, after the introduction of captive-friendly legislation in June 2023, the number of French captives has surged nearly four-fold to 23, with over 40 approvals in the pipeline.

This transformation is also the product of an extensive behind-the-scenes pedagogic effort to promote the role of captives in risk management that has sought to promote the broader benefits captives bring to businesses and economies.

“I’m very proud of the fact that we have transformed the image of captives in France,” said Brigitte Bouquot, President of FFCE, the Fédération Francaise des Captives d'Entreprise. She said that historically, France was not a captive-friendly domicile, as captives were misunderstood by regulators and some insurers and negatively perceived as tax-avoidance vehicles.

Captives needed a rebrand and educating political and economic institutions was a key pillar of their strategy, she said. “Facing the new risk landscape, we realized it was time for a change, and we came to the French Minister of Finance to explain that a captive is a fantastic tool; it is a strategic tool to support the economy.”

It was Covid-19, however, that proved the turning point. With insurance pricing and capacity harshly affected by the pandemic, especially in lines such as cyber, ministers were forced to think more creatively about how to support economic recovery.

“We said to empower the company, empower the business, give an enabler for resilience… and our message resonated,” said Bouquot.

The framework for captives in France, inspired by the Luxembourg model, is steadily improving. It will continue to evolve to meet the changing needs of companies and help them manage their risks more effectively in the future, she said. Together, French captives have created a Federation to give them a political voice and to represent their cause to the Ministry of Finance, financial supervisors and parliament.

The pipeline of potential new captives represents a diverse range of companies, both in size and sector, and Bouquot confirmed that they are currently engaging in further discussions with the French government to expand the model, with the potential to include employee benefits in the future.

Canada and the UK: a new phase of growth

The French story is part of a broader picture of evolution and growth in the global captive regulatory environment. The UK is on the cusp of its own transformation, the panel was informed.

Caroline Wagstaff, CEO of The London Market Group, said that – like in France – it has taken years of careful lobbying, made even more challenging by the recent turbulent political environment in the UK and frequent changes in political leadership.

“We’ve spent a lot of time making the argument that you can regulate wholesale insurance much more sensibly and captives are a good example because their risk is not systemic to the financial system – and that [line of argument] has landed well.”

Proof that these numerous discussions were fruitful came in July this year when the UK Treasury announced that it plans to introduce legislation that will make UK regulation more proportionate and pave the way for a more captive-friendly environment.

Canada is also evolving its own domestic captive offering, said the panel’s moderator, Zurich’s Jean-Pierre Paquet, Head of ART Canada. Historically, Canadian businesses have turned to established captive domiciles such as Barbados, Bermuda and Vermont, with a small but stable number in British Columbia.

In July 2022, however, Alberta became an onshore captive domicile and has since seen steady growth. “The number of captives is evolving, there are about 35 in Alberta and it’s a dynamic environment,” said Paquet, noting that the domicile is proving attractive both to established offshore captives and to companies that had not previously considered captives as an option.

The importance of interpretation

While captive regimes globally are gaining traction and growth, there are important differences between countries, even within the European Union.

Valerie Scheepers, Head of Non-Life and Reinsurance at the Luxembourg regulatory authority, the Commissariat aux Assurances (CAA), believes that allowing differences and interpretation within EU countries and across sectors is vital for achieving a healthy regulatory regime recognising the differences in the risk profiles between all the companies:

“Equality does not mean that you will have a fair treatment at the end. What we are looking for is to have a proportionate treatment, a fair treatment of everyone,” she explained.

For example, regulators in each domicile can take their own decision on what it means to exercise “ongoing supervision.” Meanwhile, French regulators have taken a notably different approach to governance, with a different view on outsourcing for instance.

Regulatory interpretation will be an essential element of the revised edition of Solvency 2, added Scheepers. The new edition recognises that most captives are less complex than other companies, and it outlines captive-specific provisions for governance, reporting and audit.

The revised regulation purposefully leaves room for interpretation in how the new rules are implemented at a country level: “This discretion should be used in a smart way to recognize the specificities of certain business models – that is the challenge for regulators,” urged Scheepers.

Market trends

Captives exist to provide alternative risk transfer solutions at a reasonable price when the traditional insurance market cannot. As a result, the captive market typically follows the trends within the broader insurance market, the panel heard. Currently, for example, captive demand for cyber is softening while interest in employee benefit is on the rise.

The world today is more interconnected than ever before and driven by markedly different forces than even two decades ago, said Guenter Dröse, Executive Director ECIROA, the European Captive Insurance and Reinsurance Owners’ Association. Businesses have a wide range of macro challenges to consider, from tariffs, wars and supply chain disruption to sustainability and pandemic risks, he said.

Overall, as the global risk landscape becomes more interconnected and risks such as natural catastrophe become harder to insure, demand for captives continues to grow and broaden into new countries and new industries.

In this environment, continually educating political and economic institutions about the positive role captives play remains important, the panel agreed. Collaboration between regulators and across captive regimes is also important.

Within Europe, there is a strong appetite to work together, noted Scheepers. This is demonstrated by the collaborative effort to produce a working paper drawn from discussions between regulators in Ireland, Malta, Luxembourg and France. The process is driven by EIOPA and aims to harmonise how captives are supervised across the EU, establish a risk-based approach and promote a level playing field across regimes.

The paper has required compromise across the board, said Scheepers, but the desire to remain united has been stronger. “We believe that working together in Europe is the best way to achieve resilience; compromise is important,” she said. “We are not competitors; we have to work together.”

Outlook: healthy competition

As eloquently described by the panellists, the captive insurance landscape is successfully adapting to emerging market trends. The regulatory developments in Canada, France and most recently the UK, demonstrate that it is through education, creativity and collaboration between all stakeholders that captives will continue to be enablers for resilience and opportunity.

Looking ahead, businesses globally will continue to benefit from a thriving and increasingly competitive international captive landscape. Not only will this provide a greater diversity of choice, but it will also drive innovation and quality – an exciting prospect for businesses and captives alike.

Originally published in Commercial Risk on September 16, 2025.