From: Captive Insurance Times

Anne Marie Towle, Adrien Collovray and Courtney Claflin provide an overview of the current captive market, challenges that have carried over into 2022, and what’s on the horizon

As captive domiciles around the world begin to release their 2021 statistics, indications point to continued growth and good fortune for the captive industry as a whole. This growth is manifested not only in an increase in the number of new captive and risk retention group (RRG) formations, but also in the expansion of existing captives to finance risk across a wider range of coverages. This includes coverage for excess, medical stop-loss, trade craft, environmental, cyber, medical professional liability, employment practices liability, and directors and officers liability, notes Anne Marie Towle, global captive solutions leader at Hylant.

In addition, the COVID-19 pandemic has encouraged the utilisation of captives for supply chain risk, which affects an enormous number of organisations indiscriminately across industries, operations, products and services. These companies seek alternative risk options to protect interruption to their business model, including captives.

“We are seeing more interest in establishing a captive or RRG for those organisations which either have not explored captives in the past or are reopening a captive or RRG previously shut down during the soft market,” Towle explains.

She adds that low losses means that captives are able to function as reinsurance companies, which is particularly attractive as companies seek in multi-year and multi-line reinsurance options.

“One of the best uses of a captive is the access to the reinsurance market; this can provide both capacity and a cost-effective solution for organisations,” notes Towle.

This is affirmed by Courtney Claflin, executive director of captive programmes at University of California, Office of the President. He observes “significant interest” in captive formations as a way to manage the lack of reinsurance capacity, reduction in terms and conditions, and the loss of coverages that the reinsurance market no longer provides. It is undeniable that the rising attractiveness of captives has been borne from the prolonged hardening market, lingering since the late 2010s and bringing with it high commercial pricing and capacity restrictions that, for lack of a less dramatic word, force organisations to turn to alternative risk financing and management.