The development of captives in Africa is largely driven by companies wishing to offer insurance products to affiliated customers, and Mauritius has developed into an important African captive domicile on this basis.
Until now, the use of captive insurers and cell captives has been limited to South Africa, where large enterprises mostly choose to establish single-parent captives in major international domiciles such as Guernsey, the Isle of Man or Luxembourg, or to set up cell captives domestically.
Richard Eales, managing director of Johannesburg-based Guardrisk Insurance Company, said South African enterprises' demand for providing third-party insurance and affinity products through cell captives is growing. Large clothing retailers, car manufacturers and telecom companies are particularly active, and the captive business has great development potential.
Worldwide, telecom companies commonly use captive insurers to provide mobile and other device insurance to their customers. In South Africa, MTN, the largest mobile network company, owns four active cell captives, while operator Vodacom also holds an insurance license.
"Most fixed-line operators in Africa do the same, and Class C cell captives are expected to be established in the next 12 to 18 months," he added.
Safaricom, Kenya's leading mobile network company (part-owned by Vodafone), is studying the feasibility of establishing a captive. Interest in captives is growing in East and West Africa, and the development of captives in Africa appears to have become a trend.
Ciarán Healy, global captive practice consulting director at Willis Towers Watson, said that although there is still a gap between the potential of the African captive market and the actual establishment of captive insurers, more and more companies are beginning to conduct captive feasibility studies. We have discussed doing feasibility studies with some African corporate giants, and now we have more time and resources to do it. Risk managers across the African continent are watching closely what other risk managers around the world are doing, and want to have the same options and operate at the same level.
The Isle of Man and Guernsey remain the main captive domiciles for the region. Mauritius passed insurance legislation in December 2015, with the Financial Services Commission subsequently formulating relevant rules in April this year. The emergence of Mauritius as a captive domicile has attracted the attention of more local captive shareholders, who are investing great effort in it.
Source: Captive Review