From: Captive.com/IRMI
A recent report from A.M. Best underscores the ongoing value of captive insurance companies in the face of a hardening commercial insurance market and evolving risks.
In a Best’s Market Segment Report examining the universe of European captives rated by Best, the rating agency notes that captives have proved their worth as commercial markets harden.
“Commercial insurance rate increases are driving an uptick in the use and importance of captives, as tools to provide their owners with the flexibility to navigate the insurance cycle and maintain access to cover on an ongoing basis,” Best says in the November 22, 2022, report, titled “Europe’s Captives Show Their Worth Amid Changing Market Dynamics.”
The report notes that captive insurance companies have always been important risk management tools for their owners. In hard periods of the insurance cycle, they can offer tailored risk solutions for their parents in lines of business where commercial market capacity has contracted, where prices have become too expensive, or where coverage might have become unavailable, Best says.
Captives also provide their parents with access to reinsurance markets, the report says, and can provide an efficient vehicle for managing the risks their parents are willing retain relative to the cost of coverage.