Airmic reports more ambitious use of captives in tough market

Risk and insurance managers are becoming more ambitious in how they use their captive, taking on more third party risks and using them to incubate difficult to insure risks, according to experts gathered for its first Captives Forum by UK risk and insurance management association Airmic. Event host and Airmic’s captive ambassador Richard Cutcher reports that more than 100 risk and insurance professionals attended the association’s event held at Lloyd’s of London recently. Not surprisingly, given the continued tough commercial insurance market conditions, ongoing uncertainty against the backdrop of Covid-19 and the Russian invasion of Ukraine the event was a sell-out. Cutcher reports in Airmic News that the day began with a panel of new captive owners discussing their experience of conducting a feasibility study, choosing a domicile and forming a captive. In the afternoon, two experienced captive owners discussed how their captives had evolved over time. There was also an update from Patrick Tiernan, chief of markets at Lloyd’s, on the ongoing Lloyd’s captive syndicate project. Airmic’s CEO Julia Graham moderated a panel on the future of captive insurance at the end of the forum. The panel addressed the rise in third-party risks placed into captives, the expanded role captives are playing within parent groups as a result of the hard market and how captives can support ESG betterment efforts. Cutcher reports that Elke Vagenende, global head of multinational at AIG, said that, as a fronting partner, they had noticed increased participation of captives in third-party lines, such as warranty products for customers. “The word that we’ve heard a lot today is diversification of risk. Whether you should take third-party risks in your captive or not is often a question of philosophy. Most captives have a rule or position where they only want to insure their own parent or subsidiary risks. However, there is a growing proportion of captive owners who take third-party risks,” she reportedly said. Ciaran Healy, director of client solutions for EMEA at Aon Captive & Insurance Managers, reportedly added that corporates were becoming more ambitious. “I’m seeing a lot more bravery among captive owners recently, and that’s really healthy,” he said. “We can use the captive as a way to drive some of the changes that we need to see. The risk register is changing to the extent where insurability is being diminished. Let’s use the captive, in conjunction with insurers, as the incubator to prove the underwriting concept. We can work with insurers to create the market,” Healy reportedly said. Healy believes that ESG is definitely a driver of more innovation in the use of captives. “There’s a lot of very interesting things happening, that five, ten years ago, people wouldn’t have thought would happen because regulators or tax authorities would put roadblocks up. Now we’re seeing that’s not the case. Regulators need to get on board with the sustainability agenda, for example, so we are seeing more innovative approaches to support the parent’s ESG agenda,” predicts the captive manager. The full edition of Airmic News is available at www.airmic.com.

Airmic reports more ambitious use of captives in tough market

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