Cayman’s captive insurance and reinsurance markets are seeing exciting new trends, with new business lines creating value for existing and future stakeholders, say Aon’s Howard Byrne and Ghislain Ghyoot, and PwC’s Ricardo Agrella.
Much has been written about the growing regulatory overreach of state regulators and tax authorities with regard to their treatment of captive insurance companies over the past couple of years. But tax avoidance and mitigation strategies pale in importance to the many other benefits provided by captive insurers, says the Vermont Captive Insurance Association’s Richard Smith.
Captive insurance companies can be great tools for telemedicine providers to self-insure future risks. They may create opportunities for premium savings and will certainly allow coverage to be written that is not available in the commercial insurance marketplace, says Larry Hansard at Gallagher.
The tightening of the insurance market has renewed interest in affinity groups or association captives—groups of captives whose members are all part of the same industry, say Inspirien’s Kathy Freyman and Hylant’s Anne Marie Towle.
Companies have been establishing captives for years, typically to access coverage that is not available elsewhere, to reduce long-term costs or to increase control. But once they are established, owners often find captives can also make a nice profit, say Anne Marie Towle and Adam Miholic at Hylant.
A growing number of firms are choosing to finance enterprise risks by placing them into captives. Using an ERM framework to analyse and integrate risks into a captive insurance solution allows companies to ensure their exposure to risk is handled properly, credibly, and most importantly, analytically. Michelle Bradley of SIGMA Actuarial.
Making returns in a low interest rate environment is particularly challenging for captives. Exchange-traded funds provide an option that circumvents many of the restrictions inhibiting their investment decisions, says Raghu Ramachandran at S&P Dow Jones Indices.
Providing insurance for employees is not cheap. Employers often attempt to control costs by increasing employee contributions, reducing benefits or regularly switching providers, but a growing number are using group medical stop loss captive programmes, says Dave Tatlock at SRS Vermont.
The increasing digitisation of our lives brings many benefits, but it is also making it much harder for companies to get a full picture of their risk exposures, particularly in terms of cyber risk. But captives can be used as a strategic tool to give organisations an enterprise-wide understanding of their cyber risk, says David Molony at Aon.
The growth of the sharing economy asks profound questions of the insurance industry, in many cases rendering its traditional methods of calculating and pricing risk redundant. But captives, which have historically served as a laboratory for underwriting new and emerging risks, could be a solution to this problem, says Edward Koral of Deloitte Consulting.