Captives increasingly interested in parametric triggers: AXA XL


There has been an uptick in interest in parametric solutions among captives, according to Owen Williams, head of the captive centre of excellence at AXA XL in London.

Parametric solutions are a trigger-based method of transferring risk, where payouts are based on certain predetermined criteria being met, rather than on actual calculated losses. 

As such they are a fast and transparent form of coverage, especially effective in providing coverage for non-physical damage, such as business interruption losses. 

“While trigger and index-based solutions are not new, this is an innovative and developing part of the insurance market and there is definite interest from sophisticated risk managers who tend also to have captives as part of their risk management strategy,” said Williams. 

Parametric solutions are well-suited to natural-catastrophe risks, including climate risk and earthquake, noted williams, but captives have used them in a range of situations. Because the triggers are highly customisable, they give captives “another way to offset some of those newer or emerging risks that they may otherwise find hard to place in the traditional insurance market,” Williams said. 

Adapting parametric coverages into captives offers them numerous potential benefits, added Williams, such as enabling them to accept risks that they would not ordinarily be able to underwrite. This allows them to “build up more powerful data on those risks and become an even more useful tool in their owners’ overall risk management strategy,” he said. 


Owen Williams, AXA XL, Parametric triggers, Catastrophe

Captive International