Grainne Richmond
30 June 2023Analysis

‘Very active’ Bermuda captive market can offer climate risk solutions

Bermuda’s captive insurance sector remains “very, very active and growing” and is also larger than some might realise. But it also cannot rest on its laurels and a collective effort is needed if it is to maintain its position as a market leader – plus it can offer solutions in the burgeoning climate space.

That is according to Aon Bermuda’s head of captives Grainne Richmond, who was  appointed to the board of the Bermuda Business Development Agency (BDA) in June of this year as a director of the BDA and as audit and risk committee chair. Her main remit for the BDA will be Audit Chair but she is also keen to help drive the captives industry forward.

“The captives sector has always been a big supporter of the BDA,” she said. “When it was first set up, it had a captive representative on the board. So, it's nice to have that back and bring a captive voice to the table again. I want to ensure the knowledge and experience I have is brought to that board table, so everyone understands what's happening in the captive space and the wider industry supporting the captive sector.”

She explained that the captives sector is bigger than many realise on Bermuda, partly because its nuanced multiclass licensing system means there are businesses on Bermuda not listed as captives, which would be by other jurisdictions. “We do lose some of the noise when we're talking about new formations, captives moving to Bermuda or the expansion of existing captives. It is a positive picture, and many are really growing on premium written. You just don’t see it in the captive data.”

According to Richmond captives, due to their adaptability, are also increasingly being discussed by the market as a viable risk transfer option for things like climate risk. In fact, she argues, they are increasingly seen as core risk transfer tool – just another risk transfer solution to be used alongside traditional reinsurance and ILS.

“That wasn't happening five or six years ago,” she said. “Despite the fact we really started the insurance industry here, it sometimes felt like we were the forgotten stepchild. But the captive is so adaptable as a tool, as we saw in the hard market, it can be part of the solution. In so many meetings I'm involved in, captives are part of the discussion.”

Richmond added that there had also been the misconception in the past that captives were in competition with the commercial carriers, something that she stressed that she does not agree with.

“We're not taking business from brokers,” she said. “It's a risk management tool. And that's the way it needs to be viewed. The more the captive industry itself educates everybody else on what a captive can do, the better it is for everyone. We’re now seeing conferences being held outside of the captive industry where they're inviting captive speakers. I never saw five or six years ago.”

According to Richmond on the insurance floor in Aon they have been trying to what they call cross pollinate the expertise from the commercial space into the captive space, and the captive space into the commercial and the ILS spaces. “That's working really well, because matters can come up in the captive space where we need the commercial insight and vice versa. That's where there is going to be cross pollination.”

She added: “Climate has the potential to impact the majority of insurance business lines: whether it's a good climate impact, or a bad climate impact, you're seeing that impact in insurance programs. If you have got a captive, it can be a great risk management tool and also act as a focal point of a parent companies’ ESG frameworks. Captives represent sustainable insurance.”