Long-term value is accelerating industry growth
Whether addressing the hard market, emerging risks, economic volatility, or catastrophic risks, the captive insurance industry is set to harness the momentum for continued growth, says Dan Towle (pictured), president of the Captive Insurance Companies Association.
We are still seeing many of the same challenges in the insurance market that we have been discussing for the past few years. This perfect storm of market conditions and disruptions creates an environment where captives can thrive. Whether addressing the hard market, emerging risks, economic volatility, or catastrophic risks, the captive insurance industry is set to harness this momentum for continued growth. This includes greater utilisation of existing captives and more new companies forming captives.
This continued growth has boosted the role of captives, which now represent nearly 25 percent of the overall commercial insurance market, having transferred hundreds of billions of dollars in premiums from traditional markets in the last decade, according to EY. Once an organisation understands the benefits of captives, history has shown that the premiums stay in the captive market.
It has taken us 50 years to get to 25 percent, but with the growth we are seeing, it may only take us 15 years for captives to make up 50 percent of the traditional market. We are truly in the golden age of captive insurance.
Innovation starts at the top
With the US having a mature captive insurance market, we have healthy doses of collaboration and competition, which consistently drives improvements and innovation. Captive boards play a vital role in fostering this innovation by continually trying to find ways to add value to their parent company. This encourages captives to work with their service providers to maximise the efficiency of the premiums and coverage, and it creates a culture that values always looking ahead and ensuring the captive is making efficient use of the parent company’s capital while providing the cost-effective and broad coverage they need.
Captives can be used for difficult-to-place risks and coverages that might otherwise be excluded, which is happening more often today, particularly with the less-defined emerging risks. However, as more companies see the value of captives, they continue to expand their use regardless of market conditions.
“Our human capital continues to be our industry’s greatest asset.” Dan Towle
Capitalising on new talent
Our human capital continues to be our industry’s greatest asset. The phenomenal growth of the industry has given the newer professionals who have entered the industry in the past five years a fast-tracked level of experience.
We need to continue to support the knowledge transfer and professional development of these new industry members. Bring them to meetings and events, such as CICA’s International Conference, where they can network, learn and fully experience all the captives industry has to offer. Support their involvement in programmes such as CICA’s NEXTGen and Amplify Women where they can serve on committees, network, build their public speaking skills, and more.
Educating the broader market
We need to continue sharing captive insurance’s benefits with a broader market. Many organisations have come to value the improved risk management captives provide, including non-profit organisations such as government entities, hospitals, religious organisations, universities and more.
Companies with captives need to advocate for their use within their state and federal delegations. For too long we stayed quiet to avoid potentially bad publicity based on wrong perceptions. However, this needs to change, and we need our captive owners to speak up more and put a face on the important economic impact captive insurance has.
This means companies identifying that they have captives and sharing the business purpose and benefits of operating them with their parent company so that our industry is better understood. Together, we can better shape the understanding, value and business purpose of captive insurance.
To find out more visit www.cicaworld.com
Click here to read Captive International's US Focus 2024 publication.
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
