From: Captive Insurance Times
Captives are set to benefit from the response of the wider insurance industry to the COVID-19 pandemic, according to an A.M. Best market segment report.
The report explained that commercial insurance rate increases are expected to drive an uptick in new captive formations and greater utilisation of existing.
The price increases in the (re)insurance market started to appear as early as 2018 in some segments. The market continued to harden in 2019, and increases have gained significant momentum in 2020, as the industry has reacted to losses resulting from the COVID-19 pandemic.
A.M. Best added: “Since the beginning of the year, commercial insurers and reinsurers have commonly reported double-digit percentage increases in rates, and a tightening of terms and conditions.”
The report highlighted that casualty lines have experienced significant price increases, as insurers have responded to the impact on the loss experience of social inflation stemming from increased litigation and so-called ‘nuclear’ verdicts.
As a result of this, A.M. Best observed an uptick in the use of existing captives, as owners seek optimal risk transfer solutions.