Risk retention in Scandinavia

The trend towards more public sector captive insurance companies being established in Scandinavia looks set to continue.

Public sector authorities in the region appear to be increasingly looking to form captive insurance companies due to the lack of competition in the Swedish insurance market.

While some of the larger municipalities have already established their own captives, smaller municipalities are joining together and taking the mutual captive route.

The City of Stockholm founded the first Swedish public sector captive in 1987. S:t Erik Försäkring provides cover for activities run by the City of Stockholm, one of the largest buyers of insurance in the country with an overall insured value of around SEK 250bn (£21bn, €26bn).

Anders Carlsund, chief executive of S:t Erik Försäkring, said, when it comes to captives, the public authorities in Sweden have tended to learn from the private sector. ‘Packing all the organisations risks together is a very good way to buy insurance because it makes you more attractive on the international market,’ he said.

He explained that some municipalities could miss out on the opportunities because they are too small to set up a captive themselves.

One limiting factor, argued Carlsund, could be that a company does not have the knowledge and experience to run its own captive. ‘It might be difficult to find the right leadership and it could be expensive to start up a captive,’ he said.

However, among others, over 20 municipalities in the Stockholm County have joined together in forming their own insurance companies. In this way the municipalities gain direct access to the international reinsurance markets, thus increasing competition.

Benefits, according to Carlsund, include increased claims transparency and a better understanding of risk. He also said that retaining insurance premiums within the organisation at large was a better way of managing capital.

In September last year Marsh established a captive insurance management and advisory facility in Copenhagen to serve the growing demand in the Nordic region.

FOR THE FULL INTERVIEW WITH ANDERS CARLSUND SEE THE MAY ISSUE OF STRATEGICRISK