Captives can solve the ever-evolving problem of cyber risk

The past 20 years have seen the cyber risks faced by businesses grow exponentially in terms of their complexity, sophistication, and cost. While the commercial insurance market has reacted to these changes it has done so relatively slowly. This has allowed captive insurance to flourish as a solution to financing cyber risk, Simon Kilpatrick of Advantage Insurance Management told Captive International.

Writing in our US Focus edition, Kilpatrick pointed out that a captive insurance company is well placed to solve the problem of insuring a rapidly evolving risk like cyber. Captives operate in a legal and regulatory environment far more conducive to innovation and change than traditional carriers. A captive can collect loss history and underwriting data on its insured(s) far more easily than a carrier can collect market data. The captive can then price the specific risks of its insureds rather than the generic risks of the broad market.

“As captives have historically been able to adjust their underwriting and pricing criteria far faster than the traditional carriers, it stands to reason a captive solution would be the best solution,” he said.

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