Captives offer a ‘vital edge’ in volatile times: VCIA panel

Captives can represent the perfect hedge to the conditions of hard market – as long as companies correctly assess the situation ahead of them.

At a panel discussion entitled ‘Hard-hitting solutions to hard market concerns’ at the 2022 Vermont Captive Insurance Association (VCIA) conference, panellists agreed that insurance market conditions are volatile at the moment.

Some of the challenges the market is facing include: social inflation, the aftermath of COVID-19, nuclear verdicts, litigation backlogs, higher premiums, tighter terms and conditions, higher reinsurance costs, increased ransomware attacks, environmental risks and increased property and auto costs.

The panel, which included Peter Johnson, chief P&C actuary at Spring Consulting Group, Jeff Caudill, director of risk management at Haskell and Mary Ellen Moriarty, vice president at the Educational & Institutional Insurance Administrators (EIIA), agreed that a hard market was a good time to increase efficiencies in a captive and to assess how well a captive is working.

They also underlined the business case for having a captive insurer, which includes the ability to design a risk transfer programme, evolve according to market and organisational changes, and offer better pricing and capacity options than the open market can provide.

They also noted that captives can offer improved transparency as they offer senior management more insight into claims and other insurance financials, diversify risk and finally often perform better in a hard market.

The panel stressed that it is vitally important for companies to stay ahead of the opposition, due to the wide range of stresses on the global economy – and that a captive can offer that vital edge needed to stay ahead of the competition.