From: Captive International

The captive insurance industry has been highly responsive to the COVID-19 pandemic, which has cast a spotlight on the advantages of captive insurance and brought many more organizations to the table. Four industry insiders give their views on the pandemic so far—and what lies ahead.

COVID-19 has presented challenges to the captive insurance industry, just as it has done to most other industries around the world; however, it has also created opportunities to step up and provide innovative, responsive insurance solutions to an ever-widening range of organizations. Meanwhile, organizations within the captive insurance industry have had to quickly pivot their operations to suit new ways of working—resulting in many long-lasting benefits.

Heather McClure, chief risk advisor, US Healthcare Practice at Aon, says that the captive insurance industry is better placed than many sectors to meet the challenges posed by the pandemic.

“Although COVID-19 took the world by surprise, this kind of unexpected risk is exactly what captives are built to address,” McClure says. “Formations increased, and for the captives that already existed, the nimbleness of captive risk financing structures was highlighted for many entities.

“New risks and exposures were identified, endorsements or full policies written. It has been great to see captives work as designed during this time, providing exactly the kind of protection and customized support for which they are designed.”

The industry took the opportunity to shine as a support for insureds during COVID-19.”

Heather McClure, Aon

Nick Hentges, chief executive officer/principal at Captive Resources (CRI), has seen group captive members impacted in a variety of ways, depending on their sector—and this has in turn affected what they require from their captives.

“The hospitality industry—hotels and restaurants—as we all know, was strongly impacted, and there are some members from that industry in our client captives,” he says. “We were proud of their resilience and ability to carry on their businesses in different ways during the toughest times of the pandemic.”

However, the majority of Captive Resources’ member companies are manufacturers, contractors and transportation companies—and those companies were growing, not shrinking, during COVID-19.

“Most of the member companies did very well, and were financially strong to begin with,” Hentges says. “As far as interest in group captives is concerned, 2020 was the best year CRI had ever had from a new business perspective, with over 500 new captive members. And 2021 was a better year than 2020, so in total we’ve added over 1,000 new members in the middle of the pandemic.

“That’s a great testament not only to our group captive model, but to the fact that the industries and companies we’re trying to attract to captive insurance are still doing very well, even in the middle of a pandemic.”

Another factor that Captive Resources has watched very closely is the impact of COVID-19 on workers’ compensation.

“At one point, there was a great deal of concern that there would be a lot of COVID-19-related workers’ comp claims,” says Hentges. “There have been a number of them, but not to the extent that we were concerned might happen, so we think that’s a very positive thing as well.”