Challenging times ahead for captive buyers

Attritional losses from a string of black swan events such as COVID 19, severe hurricanes and financial crises are having an impact on captives, a panel at the Bermuda Captive Conference 2023 warned.

The panel, entitled “Exploring excess: trends and opportunities for global reinsurers”, consisted of Ann Kolman, senior vice president & head of North America casualty at Sompo and Michael Woodroffe, president of Kirkway International and was moderated by Rick Hartmann, senior vice president at Guy Carpenter.

Woodroffe pointed out that over the past decade the third quarter of the year has almost always seen heavy losses from natural catastrophes such as hurricanes, with some losses coming at awkward times for the market.

He also pointed to the recent Vestoo scandal as having had a disruptive impact on the insurance linked securities (ILS) market, with it possibly delaying the development of ILS business in the casualty market.

Kolman pointed out that for those that were worried about social inflation, that was not a new phenomenon, with high jury awards being several decades old.

She added that captives can be isolated from some trends due to loss control but also pointed out that they are seldom completely immune. Excess solutions can help, due to their ease of use, flexibility, real time management and commitment to service.

Woodroffe also underlined that captives can be better insurance companies than many traditional ones, adding that in his view a good, well-run captive can be the best form of insurance.

He also stressed that data management is vitally important, that wordings need to reflect intent and that captives need to explore alternatives, including financing strategies.