From: Captive International

The hardening insurance market—amplified since COVID-19—is driving even more organizations to look at captive insurance solutions as market pressures increase. Six industry experts give their views.

The insurance market was hardening before COVID-19 but as the shockwaves of the pandemic continue to ripple around the world, coverage has become more restrictive, expensive and difficult, and increasing numbers of organizations are looking to captive insurance as a solution.

A feeling of being let down by the mainstream insurance market during the pandemic, coupled with an amplified drive for innovation and resilience, has created a willingness to try a new approach—and the captive insurance sector has risen to the challenge.

“The hard market has dramatically affected the demand for captives over the course of the last two years,” says Anne Marie Towle, global captive solutions leader at Ohio-headquartered brokerage and risk management firm Hylant.

“We are seeing this with new formations, which have been outstanding the past year for many of the domiciles. In addition, current captive owners have made changes to their existing programs and are financing more risk through their captives. I believe this trend will continue well into 2022 and 2023.”

Organizations need to think outside the box, apply technology to improve the client experience and train younger staff to step into roles to assist clients”

Anne Marie Towle, Hylant Global Captive Solutions

Nancy Gray, regional managing director–captive & insurance management, Commercial Risk Solutions at Aon, agrees that the captive insurance sector is growing fast. Her organization has experienced a significant increase in captive utilization over the past three years as the market has hardened.

“Although there continues to be adequate capacity in the market, there have been significant price increases over the past three years, especially in certain lines such as property and fiduciary lines,” she says.

“Clients have continued to experience increased premium rates, constrained capacity, and gaps in coverage. In addition to the increased utilization of existing captives, we had a significant demand for captive feasibility studies in 2020 and 2021 as compared with 2019, which has resulted in a substantial number of new captive formations.”

Mikhail Raybshteyn, financial services partner at professional services firm EY, sums it up nicely when he describes the recent situation as “a rather interesting rollercoaster”. He notes that the situation is more complex than it may at first appear. On one side he has seen a very large uptick in captive formations and captive program augmentations. On the other, he has seen companies deciding to close their captives or keep them “as is” due to reorganizations or other changes to the business.