Captives at the crossroads: bridging the growing insurability gap
At the recent AIRMIC Captives Forum, a panel session entitled “New risks from incubation to market placement” brought together leading voices from across the captive and reinsurance landscape to explore how organisations are responding to an expanding insurability gap. Moderated by Matthew McEwan, director of risk management at Coca-Cola Europacific Partners, the discussion featured Ciaran McCabe of Aon (White Rock), Jody Bisson of WTW in Guernsey, and Yann Krattiger of Swiss Re Corporate Solutions.
McEwan noted the breadth of the topic and the challenge of covering it in just 35 minutes. The conversation quickly turned to the findings of the latest AIRMIC captive survey and other major risk reports, including those from the World Economic Forum and Swiss Re. A consistent theme emerged: while risk awareness among organisations is high, the proportion of those risks that are fully insurable in the traditional market is strikingly low.
McCabe highlighted that, across global risk surveys, cyber and technology risks (increasingly driven by artificial intelligence), supply chain disruption, contingent business interruption, climate-related events, geopolitics, reputational threats and human capital challenges consistently rank among the top concerns. Yet only two of the top ten risks identified in such surveys are considered traditionally insurable. Even when expanding the lens to the top 60 risks, only a minority fall neatly within established property, liability or business interruption products.
This widening insurability gap is not leading risk managers to abandon hope. Instead, it is driving more strategic use of captives. As McCabe explained, organisations are increasingly using captives as incubators for new and emerging risks, acting as a bridge to the commercial market. By underwriting these exposures internally, collecting data and refining policy wordings, captives can demonstrate proof of concept and, over time, attract external capacity.
Bisson reinforced this point from a Guernsey perspective. Historically, captives were largely reactive, established to plug gaps in property and casualty programmes. Today, however, companies are looking forward rather than backwards. Conversations have shifted from known, historical losses to future-facing threats such as climate change and reputational damage. Guernsey’s flexible, principles-based regulatory framework has enabled innovation in this space, supporting experimentation with new coverages.
Cyber provides a clear illustration of this evolution. Once regarded as uninsurable within captives, it has become one of the most common lines now written. The lesson, Bisson suggested, is that today’s uninsurable risk may become tomorrow’s mainstream captive line.
Krattiger broadened the debate by reframing it around risk financing rather than a binary distinction between insurable and uninsurable risks. All material risks, he argued, already sit on a company’s balance sheet. The question is not whether they exist, but how they are mitigated, retained and transferred in an optimal mix. Captives play a crucial role in improving capital efficiency and total cost of risk by pooling exposures and imposing underwriting discipline, even where full risk transfer is not immediately available.
Importantly, the current market cycle offers a window of opportunity. Following a period of hard market conditions and budgetary pressure, some softening is now evident. Rather than simply returning savings to the parent, Krattiger suggested that organisations might consider reinvesting in captive structures, using surplus capital to incubate emerging risks and generate the data required for future reinsurance or capital markets engagement.
The panel also explored practical considerations. McCabe outlined a disciplined four-step approach to developing new lines within a captive: clearly defining the risk and its strategic importance; designing robust coverage parameters; assessing data availability and capital impact; and ensuring strong governance at both parent and captive board level. New products should be treated as pilots, subject to review and adjustment after 12–24 months.
Data, repeatedly described as “the new oil”, remains both an opportunity and a challenge. Bisson observed that organisations often underestimate the data they already possess. Early engagement with captive managers and cross-functional stakeholders is essential to identify, structure and refine this information into meaningful underwriting insight. Krattiger added that raw data must be converted into knowledge through analytics and disciplined processes.
Real-world examples illustrated success. Parametric earthquake cover for vending machine operations in Japan demonstrated how innovative triggers can provide rapid liquidity for non-traditional losses. Another case involved parametric solutions for solar flare exposure affecting satellite and telecommunications infrastructure, where captive incubation gradually attracted market support as data and confidence improved.
Looking ahead to 2030, panellists predicted that climate change and AI-driven cyber risks will loom even larger. However, Bisson cautioned that the specific top ten risks may be less important than ensuring that captive frameworks remain adaptable. The pace of technological and geopolitical change makes precise forecasting difficult, but resilient structures and strong governance can ensure preparedness.
In closing, McEwan reflected on the growing demands placed on risk managers. Demonstrating relevant, resilient and forward-looking risk financing strategies is increasingly essential. The message to delegates was clear: captives are no longer merely gap-fillers. They are strategic tools for innovation, data development and market engagement. As emerging risks continue to outpace traditional insurance solutions, their role in bridging the insurability gap is set only to expand.
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