CEO Captive Insurance Solutions NZ
Education is the key to continued growth in the South Pacific, says Dean Spense of Captive Insurance Solutions New Zealand
How is the South Pacific captive insurance industry expanding?
With a lack of incentive from both the reserve banks and Australasian brokers, there’s limited knowledge on captives. Captive Insurance Solutions New Zealand (CISNZ) is focusing exclusively in this space because the potential for expansion is unlimited. As part of that, CISNZ is involved in an education process, and we are enjoying the benefit of our activities.
What is holding the South Pacific back in terms of growth?
I think it’s because there is no government incentive to promote the growth of captives and in the absence of any enthusiasm from that quarter, brokers are more than happy to continue receiving generous brokerage income from their clients.
Is education the key strategy to stimulate growth in the South Pacific market?
Yes. Education is precisely the key to continuing growth. Given that the respective reserve banks of New Zealand and Australia do not encourage captives to be domiciled locally, we are placed in a situation whereby any prospective captive client must be assured that the domicile we use provides them with legislation that is robust.
How are current market conditions holding captive formations back?
We have seen a softening of the traditional market over the past few years and as a result, some prospective clients find it difficult to understand the benefits of a captive. Once we have completed a full feasibility analysis, we are then able to provide compelling reasons for our client to consider this form of alternative insurance arrangement. As we all know, however, it is merely a matter of time before the cycle changes and rates start to increase. When this change occurs, and it will, we will be placed in a position whereby a larger number of Australasian companies decide to consider this alternative risk transfer mechanism.
What makes the South Pacific an appealing location for captives to domicile in?
As indicated, Australia and New Zealand dp not promote themselves as domiciles for captives due to legislation, capital and solvency margin requirements. Our focus is on utilising a domicile that can assist our clients.
Both Vanuatu and the Cook Islands have enabling legislation and offer the ability to create a captive entity in these domiciles.
Whilst these are small island locations, we can effectively utilise their legislation while retaining New Zealand and Australian banking facilities.
