A reinsurance captive is a regulated insurance undertaking established by a corporate group to reinsure its own risks. It provides tailored coverage, predictable cost structures, and enhanced transparency compared to conventional insurance programmes.
Luxembourg is the leading EU jurisdiction for reinsurance captives, with more than 250 authorised reinsurance undertakings. Its regulatory stability, EU passporting rights, and strong professional ecosystem make it a preferred location for multinational groups seeking long-term risk-financing solutions.
Reinsurance Captive and Luxembourg’s Regulatory Framework
Reinsurance captives in Luxembourg operate under the Law of 7 December 2015 on the Insurance Sector, which reflects the Solvency II Directive (2009/138/EC). This framework establishes capital requirements, governance functions, risk management duties, and reporting obligations.
Supervision is entrusted to the Commissariat aux Assurances (CAA). Captives must maintain a Provision for Claims Fluctuation (PCF), a Luxembourg-specific buffer designed to mitigate long-term claims volatility. They must also comply with the four Solvency II key functions: risk management, compliance, internal audit, and actuarial.
Luxembourg allows the delegation of operational tasks to a licensed Captive Manager, ensuring efficient handling of accounting, actuarial duties, regulatory reporting, and technical reinsurance operations under proper oversight.
Reinsurance Captive and Current Market Conditions
Corporate insurance markets remain in a hard cycle, characterised by premium increases, narrower underwriting appetite, and reduced capacity. Large corporates face rising renewal costs and constraints on coverage availability.
A reinsurance captive offers a structured alternative. It centralises risk, enhances control over pricing, improves wording flexibility, and gives companies direct access to international reinsurance markets—often securing more competitive terms compared to direct insurers.
This structure also reinforces transparency, supports governance, and reduces dependency on market fluctuations.
Reinsurance Captive as a Strategic Asset
Reinsurance captives allow groups to build technical reserves, support subsidiaries across multiple jurisdictions with consistent methodologies, and strengthen long-term insurance planning.
They are increasingly used by industrial groups, energy producers, logistics operators, banks, and technology companies seeking stability, capital efficiency, and improved risk governance.
Reinsurance Captive: How to Launch in Luxembourg
1. Feasibility and Risk Assessment
A comprehensive actuarial and financial study evaluates exposures, loss history, Solvency II capital requirements, and projected operating results. This step determines whether a captive is economically viable and strategically justified.
2. Legal Structuring
Captives are generally incorporated as a Société Anonyme (SA) or Société par Actions Simplifiée (SAS). The structure must comply with corporate law, fit-and-proper rules, and Solvency II governance requirements.
3. Licence Application
The licence application submitted to the CAA includes:
- Business plan and financial projections
- Solvency capital calculations
- Governance and internal control framework
- Reinsurance programme design
- Outsourcing contracts
- Identification of key personnel and directors
4. Regulatory Review
The CAA assesses the application, governance architecture, internal controls, actuarial elements, and the proportionality of the Solvency II framework adopted. Clarifications may be required before approval is granted.
5. Operational Launch
Once authorised, the captive executes its reinsurance treaties, receives capital contributions, activates key functions, and sets its compliance calendar for Solvency II reporting and internal governance obligations.
6. Ongoing Compliance
Captives must fulfil quarterly and annual Solvency II reporting, actuarial opinions, audit cycles, governance reviews, and any supervisory requests from the CAA to maintain regulatory soundness.
Reinsurance Captive: How Damalion Supports Clients From A to Z
Damalion offers end-to-end assistance throughout the establishment and operation of a reinsurance captive in Luxembourg. Every phase is coordinated with vetted experts from Luxembourg’s regulatory, actuarial, legal, and audit ecosystem.
1. Feasibility & Strategic Advisory
- Detailed actuarial and financial assessment
- Risk mapping and structural recommendations
- Solvency II capital modelling
- Independent analysis with vetted actuarial specialists
2. Legal Structuring & Corporate Setup
- Guidance on choosing the appropriate legal form (SA or SAS)
- Drafting corporate documentation and governance rules
- Coordination with vetted legal and regulated professionals
- Completion of incorporation and notarial procedures
3. Licence Preparation & CAA Submission
- Preparation of the complete licensing dossier
- Drafting of governance, compliance, and risk frameworks
- Coordination with vetted actuarial, legal, and Solvency II consultants
- Management of communication with the CAA during the approval process
4. Governance, Key Functions & Captive Management
- Identification of suitable, fit-and-proper directors
- Structuring of Solvency II key functions (risk, compliance, actuarial, internal audit)
- Access to vetted Captive Managers for operational outsourcing
- Drafting internal policies, procedures, and reporting frameworks
5. Auditor Selection & Professional Network
Damalion coordinates with vetted audit firms experienced in captive reinsurance, ensuring full alignment with regulatory expectations.
Support includes:
- Defining auditor selection criteria
- Shortlisting Big Four and specialised audit firms
- Coordinating proposals and onboarding
- Aligning audit scope with CAA requirements and Solvency II disclosures
6. Operational Launch & Ongoing Compliance
- Assistance during capital injection and treaty execution
- Setup of reporting calendars and control processes
- Coordination with vetted providers for accounting, actuarial services, and Solvency II reporting
7. Long-Term Risk & Financial Optimisation
- Review of reinsurance structures and cost efficiency
- Reserve management strategies, including the PCF
- Support with consolidated risk reporting across multiple jurisdictions
