[Watch and Read] Innovation a cornerstone of the captive insurance market
For the first of three features, Captive International asked a panel of experts about the role that innovation plays in the current market.
The captive insurance market is increasingly recognised as an essential avenue for businesses to navigate the complexities of today’s risk environment. Captive International assembled a panel of experts from across the industry for an online panel for this edition of US Focus.
As Kevin Mead, chief executive of the Vermont Captive Insurance Association (VCIA), pointed out: “There is a gap between the expectation of the consumers, ie, the businesses, and the ability of the commercial side to deliver.” This gap is expanding as businesses become more sophisticated in identifying and managing risks that were previously considered uninsurable.
“The landscape of risk management is becoming increasingly strategic, necessitating thoughtful and innovative approaches to structuring risks.” Anne Marie Towle, Hylant
Captives, according to Mead, are at the forefront of addressing these needs, often outpacing the traditional commercial insurance market in providing innovative solutions.
Anne Marie Towle, chief executive of Global Risk and Global Captive Solutions at Hylant, echoed this sentiment, noting that the roots of the captive industry are deeply intertwined with innovation. “The initial captives stemmed from innovation—what can we do differently because the commercial market is not responding to our needs,” she explained.
Towle believes this spirit of innovation remains vital, especially as the market conditions continue to evolve. She emphasised that the landscape of risk management is becoming increasingly strategic, necessitating thoughtful and innovative approaches to structuring risks, particularly in response to challenges such as climate change.
Jesse Olsen, chief operating officer of Helio Risk, brought a financial perspective to the discussion, highlighting the unique role captives play in the broader context of risk finance. Olsen noted that captives have the potential to “change the game” by offering more flexible, multi-year approaches to risk financing, which is in stark contrast to the annual renewal cycle typical of traditional insurance.
He pointed to the growing convergence between capital markets and traditional insurance, where captives are leading the way in integrating new financial products such as insurance-linked securities and derivatives designed to cover emerging risks.
“By fostering innovation and leveraging new technologies, captives can stay ahead of the curve.” Stephen Taylor, Delaware DOI
From a regulatory standpoint, Stephen Taylor, director of the Bureau of Captive and Financial Insurance Products for the Delaware Department of Insurance, stressed the importance of innovation for the long-term success and growth of the captives industry. Taylor believes that by fostering innovation and leveraging new technologies, captives can stay ahead of the curve and adapt more readily to changing market conditions, including emerging risks like cyber threats and the regulatory shifts that accompany them.
Mark Weideman, captive director for the Tennessee Department of Commerce and Insurance, acknowledged the pressures companies face in the traditional insurance market, where continued hard market conditions and the cancellation of coverage lines are forcing businesses to seek alternative risk management solutions.
Weideman highlighted the need for the captive insurance market to adapt quickly to meet these evolving needs, emphasising the role of regulators in supporting this innovation. “It’s important for the captive insurance market to be able to adapt and meet those needs,” he said, noting that regulators must strive to keep pace with industry innovations to ensure they are effectively governing and supporting the sector.
In conclusion, the panel agreed that as the captive insurance market continues to expand, driven by the need for tailored risk management solutions, the role of innovation cannot be overstated. Whether through financial ingenuity, strategic risk structuring, or regulatory adaptability, the future of captives appears inextricably linked to their ability to innovate and address the dynamic risks of the modern world.
Click here to read Captive International's US Focus 2024 publication.
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