Captive insurance use likely to become more prevalent among national oil companies: Marsh

National oil companies (NOCs) are expected to find captive insurance use more compelling in light of legislation that is now making it easier for NOCs to establish a captive within their own — or a local — jurisdiction, according to a report by Marsh.
“With a growing list of countries implementing captive legislation, more NOCs will be able to establish a captive within their own, or nearby, jurisdiction,” says Jonathan Groves, author of Is captive utilisation an optimal strategy for National Oil Companies?
“Captives insurance will only ever be one part of an NOCs risk management and mitigation strategy, but we predict it will become an increasingly important one.”
Currently, NOCs creating a captive in another country would have to place assets in a third country, making captives a less attractive option for them.
Only 12% of the world’s 113 NOCs currently use captive insurance, despite widespread use by International Oil Companies (IOCs).
The case for captive insurance use is becoming more compelling because NOCs are increasingly looking toward expanding operations overseas, and undertaking more joint ventures with IOCs and other partners, according to Groves.
The benefits of a captive to an NOC, according to the report, include:
• rigour of process in identifying and valuing assets and managing losses;
• direct reinsurance market access;
• management of insurance relationships with joint venture partners; and
• management of risk within international business operations.