Despite their widespread use by International Oil Companies, new research reveals that only a small proportion of the world's National Oil Companies (NOCs) own and operate their own insurance vehicles. Known as captive insurance companies, these vehicles are used by the majority of the world's largest corporates to manage more efficiently their enterprise-wide insurance needs.

Captives enhance the ability of firms to identify and value business-critical assets as well as to make loss management more effective. They can also strengthen risk management capabilities, especially for businesses with global operations, and make the management of insurance relationships with joint venture partners more efficient.

The research, which was carried out by Marsh, the world's leading insurance broker and risk adviser, found that only 12 percent of the world's 113 NOCs currently utilise captive insurance. Among the larger NOCs, captive use was higher at 33 percent.

Marsh recommends that, where appropriate, NOCs step up their use of captive insurance to manage risks such as property damage and business interruption, liability, marine, aviation, construction, environmental and terrorism risks, as well as Control of Well.

Jonathan Groves, the report's author and Leader of Marsh's Captive Consulting Practice in Europe, the Middle East and Africa, said: "With NOCs looking increasingly at expanding their operations overseas, as well as more joint ventures with IOCs and other partners, the case for captive insurance use is becoming more compelling.

"With a growing list of countries implementing captive legislation, more NOCs will be able to establish a captive within their own, or nearby, jurisdiction. 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."

Copy of Marsh's report, Is captive utilisation an optimal strategy for National Oil Companies?, can be downloaded at: global.marsh.com/nationaloilcompaniesconference/index.html.