4 March 2019Analysis

Ride-sharing giant Lyft details Hawaii captive in IPO

Ride-sharing company Lyft has outlined details of its wholly-owned captive insurance subsidiary in an SEC filing.

Lyft aims to trade on the Nasdaq Stock Market by the end of March, and filed its IPO prospectus on Friday March 1, which detailed its financials to potential investors, along with the details of its insurance arrangements. Lyft said it has made substantial investments in its insurance programme, which it expects to enable it drive cost savings over the longer term.

"We are also focused on addressing insurance-related costs by making significant investments in technology with an objective to decrease the frequency of accidents and insurance claims by drivers on our platform and reduce the ultimate costs of such claims," the filing said. "By leveraging our data and technology, we are seeking to reduce cycle times, improve settlement results, provide a better user experience, drive down our cost of claims and have fewer accidents by drivers on our platform."

Pacific Valley Insurance Company was registered in Hawaii on September 4, 2013, and is managed by Marsh Management Services.

Since October 2015, Lyft has elected to reinsure substantially all of its financial risk with respect to auto-related incidents in the US using its wholly-owned insurance subsidiary.

Lyft relies primarily on its wholly-owned insurance subsidiary to insure its auto-related risk and on third-party insurance policies to insurer its operations-related risks. In 2018, there were 30.7 million riders using Lyft's services, and $8.1 billion in bookings.

Together the insurance subsidiary and third-party insurance are used to re/insurer costs including auto liability, uninsured and underinsured motorists, auto physical damage and general business liabilities up to certain limits.

Aleka Insurance is also registered in Hawaii as a captive insurance company, with Uber's head of insurance Henry Gustav Fuldner listed as president, treasurer and director. It is managed by Aon Insurance Managers - Hawaii.

Peer-to-peer transportation is often seen as an opportunity for captive insurance to step in, offering more flexibility to tailor policies and ability to bundle products. Companies may want to pool their risks into a captive or RRG given the many players involved, for example the car manufacturer, original equipment manufacturers, car dealers and vehicle owners.

Captive International previously covered a panel at VCIA 2018 conference that suggested insurance products will transform as subscription and usage-based models become more prevalent.

Lyft and Uber have been contacted for comment.