WILLIS CALLS CURRENT SOLVENCY II APPROACH TO CAPTIVES "PENAL"

Global broker Willis has noted that the current "one size fits all" approach to captive insurers is "penal". Willis said that more than 50% of captives had sufficient capital to meet the anticipated increase in capital requirements imposed by Solvency II, but that, of those that did not have sufficient capital, the average shortfall was 80%. Willis also claimed that the average capital required for captives under Quantitative Impact Survey 5 was five times that currently required under Solvency I. Willis compiled its results from clients domiciled in three major European onshore locations. Willis said that "in our experience, if a company has good reasons to be onshore, then QIS5 is not changing this". In further findings, Willis said that many of the increases in solvency requirements under QIS5 could be "substantially mitigated by relatively straight-forward changes". Willis also found no evidence as yet of captive migration as a result of Solvency II. Although captive set-up activity in domiciles within Europe or outside continued in roughly the same fashion, Willis noted that companies were "increasingly interested in utilizing cell technology". Finally Willis said that to date there had been "no evidence of any immediate or future impact on commercial market pricing or any expectation of changes to fronting costs/ security requirements for fronting EU risks to non-EU captives".