From: Captive International

The insurance market increasingly resembles that of the 1980s, one of the most challenging insurance markets in history for those buying insurance, according to Jim Swanke, senior director of captive consulting at Willis Towers Watson. And this could trigger a swathe of new captives being formed.

Speaking on a Willis Towers Watson webinar titled The Role of Captives in Difficult Times, Swanke warned the market is set to keep hardening over the next 24-36 months, with premiums rising and capacity falling. That makes it a very difficult environment for buyers of insurance.

“This market increasingly resembles the hard market of the 1980s, which was one of the worst insurance markets in history [for buyers],” said Swanke.

He said this will encourage new companies to consider launching captives.

Swanke said companies should think about launching single parent captives when they were able to collect premiums of around $1 million, given they tend to have running costs of between $75,000 and $150,000 per year.

Erin Boulware, senior associate of client development at Willis Towers Watson, said these running costs represent good value for companies, which will still benefit from their captives when markets start softening again.