Key takeaway
Interest in traditional property and casualty captive programs remains high during the continuing hard insurance market, but there is increasing consideration being given to emerging risks and those risks not previously managed through captives.
Areas such as climate/weather risks, cyber, non-damage business interruption and D&O are increasingly being structured around a captive as the corporate focal point for managing risk financing.
- We believe that this emerging shift in captive deployment not only tracks insurance market conditions but is further enabled by better data and analytics capabilities.
- These tools are facilitating advances in quantification of both individual risks and portfolios of risks, including multiple lines of business.
- In some cases, captives may be able to assume emerging risks based on sound data analysis before traditional insurance markets have an opportunity to develop their own products or set their standards for pricing.
- We anticipated an increase in the use of analytics to support decision making and to optimize cost of risk transfer in market negotiations. We have seen particular interest among existing captive owners wishing to optimize their use of capital and tolerance for risk.
- We expect captives to continue to play an expanding strategic role in risk financing decisions in the medium to long term.
U.S. domiciles
- Many U.S. captive domiciles are reporting increases in new captive licenses and an influx of business plan changes resulting in captives taking on more risk, trends we expect to continue into 2022.
- Expanded captive business plans are trending with ventilated layers and quota-share positions in excess property and casualty lines.
- Several domiciles are also reporting an uptick in number of captive cell formations within sponsored protected cell facilities.
Americas offshore
- The key Atlantic and Caribbean domiciles of Bermuda and the Cayman Islands have seen a modest number of new captive insurance licenses issued during 2021 with eight and 17 respectively (Bermuda Monetary Authority and Cayman Islands Monetary Authority).
- New activity remains largely focused on business from the U.S., but there has been an uptick in enquiries from Latin America. Europe continues to generate activity, while interest from Asia and Australasia remains modest.
- Cayman continues to see new activity in the healthcare sector, which remains its largest generator of captive business.
