Captives take centre stage in risk resilience: IFRIMA president

The global insurance landscape is evolving, and captives – self-owned insurance subsidiaries – are taking centre stage in conversations around long-term risk resilience and financial strategy. 

Franck Baron, President of IFRIMA (International Federation of Risk and Insurance Management Associations) and chief risk officer at International SOS, shared his insights on the growing importance of captives, especially in Europe, with AIRMIC Today.

“What we saw, technically, [was] a surge of captive creations around the world,” said Baron. “Over the last three years, as part, I guess, of the hardening insurance market... the market is softening again. So this is where it’s going to be, I guess, the acid test.”

The “acid test”, as Baron describes it, is determining the true motivation behind creating captives. Were they established to simply navigate the high costs of a hard insurance market? Or do they reflect a deeper commitment to building organisational resilience?

Baron believes the answer will become clear as market conditions continue to shift. “Is it about leveraging on the market cycle price,” he asked, “or is it really about developing a long-term resilience strategy for the organisation?”

The test is personal as well as professional. At International SOS, the company has already embedded captives into its risk framework. “If I take the example of International SOS... primary layer on cyber, for instance, [is] within the captive now. So we only buy excess layers. Even if the market is softening, I will not come back, because that’s now the risk appetite that the company is willing to take.”

This steadfast approach signals a broader transformation in how captives are perceived. Far from being a tactical move during insurance downturns, captives are becoming part of strategic, board-level discussions.

“I witness many risk managers articulating the conversation in their organisation with top management around a captive tool,” Baron explained. “It’s a risk financing tool. It’s a strategic one, and it can help us to further improve the resilience of our organisation, financially speaking, irrespective of the way you are procuring insurance in [the] commercial market.”

French recent onshore captive legislation is a prime example. According to Baron, “It is connected to resilience. It is about telling organisations, ‘We are going to give you the right or the possibility to create an onshore captive because we want organisations to be better at managing resilience on the long term.’”

Yet there remains untapped potential, particularly in the area of employee benefits. “Out of the 7,000 captives globally, only 200 of them are doing some employee benefits – so people risks,” Baron noted. “There is definitely room to do it... My captive is involving people risks and general insurance... it’s a great way to help the organisation to be better at managing these types of risks.”

For Baron and many of his peers, the message is clear: captives are no longer just a reaction to insurance pricing cycles. They are becoming pillars of long-term, strategic risk management.

“There is no way back,” he said with conviction. And perhaps, in this new era of resilience-focused thinking, that’s exactly the point.

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