Some major New Zealand insureds are looking at setting up captive insurance companies in Singapore as their country’s stronger prudential requirements come into force.

Marsh NZ CEO Grant Milne says some larger clients are considering the Singapore option because the new Insurance (Prudential Supervision) Bill will make it less attractive to maintain a captive in New Zealand.

Singapore has been keen to attractive captives and it takes about six weeks to obtain approval.

Companies can set up a captive insurer with minimum capital of $S400,000 ($304,000), although they are expected to have a higher provision relating to their risk. Any funds over the $S400,000 can be used by the parent company.

The New Zealand law will require non-life captives to hold minimum solvency capital of $NZ1 million ($800,000) based on risk weightings of their assets and liabilities. Marsh believes companies are likely to need more funds than for the Singapore option and will find it less attractive to “lend back” funds to the parent.

Mr Milne says a company could relocate by putting its New Zealand captive into run-off and transferring any liabilities and assets to a new captive in Singapore.

The NZ captive could then be wound up and the $NZ500,000 ($380,000) bond currently required would be released by the trustee.