Captives ensure risk management efforts are rewarded

Launching a captive can ensure risk management efforts are rewarded with lower premiums, according to Mary Wolbert, director at Froedtert Health, a healthcare company.

Froedtert Health launched its captive in 2016 because it was not seeing its efforts at managing risk translating into reductions in premiums, said Wolbert. She was speaking at the Cayman Captive Forum, on a panel titled Convergence of Exposures Across Lines – How Your Captive Can Help.

The captive started writing workers' compensation and professional and general liability, having been advised to get the captive up and running before launching into too many different business lines, she said. Today Froedtert's captive writes 16 different lines, said Wolbert, and has seen its premiums – and volatility – fall.

The captive is keen to take on more risk, increase retentions and reduce premiums where possible, she added.
“We spend a lot of time evaluating exclusions and policies, and thinking about how to leverage the captive,” said Wolbert. “It is a continuous process and it changes week by week. Whenever we think we have the right balance another settlement changes the picture. You have to keep stress testing the coverage.”

Meanwhile, Willis Towers Watson data show that billings fraud and kickbacks account for 83 percent of healthcare D&O losses.

Increasing instances of litigation will likely drive increasing frequency and severity of D&O claims in coming years, said La'Vonda McLean, finex national healthcare industry leader for North America at Willis Towers Watson. That upward trend can already be seen in rising costs, she said: in 2019 a settlement was double the size of a comparable case in 2011, she noted.

D&O claims are also coming from an increasing number of sources, said McLean, citing the claim against Tesla's Elon Musk following an ill-advised tweet.

Kelly Webster, underwriter at Beazley, said the insurer has been tracking #metoo-related claims for the past three years, in which time the top claims have gone from six-figure to seven-figure sums.

McLean advised insureds to carefully monitor D&O policies. Providers change what is covered over time, she said, while policy wording varies considerably between insurers, particularly in certain line.