Captive insurers are paying a large majority of COVID-related claims they are receiving, according to a report by the Self Insurance Institute of America (SIIA).
Captive managers are paying on average 80.5 percent of COVID claims submitted, according to the SIIA’s 2021 Captive Survey and Trend Report.
Some captive managers have reported up to 300 COVID-related claims across their client groups in the past year, the SIIA report said, with the average captive manager reporting 75 COVID-related claims across their client groups.
The highest COVID-related claim reported was $2 million, with the average COVID-related claim being $650,000.
The report found that captive formations had comfortably outpaced closures, with formations averaging 28 for captive managers compared to 20 captive closures. The top three captive domiciles utilised by respondents to SIIA’s survey were Delaware, Tennessee and North Carolina.
The SIIA also noted that more than a third (35 percent) of respondents have a captive currently under audit by the Internal Revenue Service. However, it found that despite IRS pressure and regulatory burdens, captive owners remain hesitant to take the IRS global settlement offer, with some captive managers stating that over 95 percent of clients chose not to settle, although there was considerable variation between managers.
The report noted that economic and supply chain issues associated with COVID, and the hardening insurance market, have led to increased interest in captives among business owners. “This trend is being seen in increased captive formation across a number of recent captive domicile reports and underscored by the results of this survey,” it said. “It is our view that the increase in business interest in captive insurance will continue beyond COVID-19 and drive the industry to better meet evolving and ever-changing risks in upcoming years.”
Self Insurance Institute of America, SIIA