Reinsurance & captives – take a long-term view

Incorporating reinsurance into a captive structure can be straightforward, provided the captive owner possesses the necessary expertise and selects an option that aligns with the captive's long-term commercial objectives.

That was the perspective which emerged during a panel discussion on 'Securing Your Captive's Future: The Power of Reinsurance' at the ongoing Vermont Captive Insurance Association (VCIA) annual conference. The discussion was moderated by Ryan Gadapee, Shareholder at Primmer Piper Eggleston & Cramer. Other panellists included Jeremy Johnson of Gryphon/Revantage, Steve Bauman, Global Programs & Captives Director, Americas at AXA XL, and Chris Ervey, Executive Vice President at BMS Re.

The panel emphasised the importance of considering various factors, such as conducting feasibility studies, determining the optimal timing for introducing reinsurance, addressing momentum issues, achieving critical mass for future progress, and attracting attention from underwriters.

Captive managers should recognise the depth and breadth of reinsurance as a vital risk management tool, understand how reinsurance functions as a protective measure for captives against unforeseen losses, and implement strategies to leverage reinsurance for optimal captive program outcomes.

Additionally, the panel underscored the significance of accounting for the long-term implications of reinsurance ventures. Taking a long-term perspective can enable the incorporation of new business lines, additional capacity, diversified relationships, and legacy exit transactions.

Relationship building was particularly emphasised by the panel as a crucial part of any company's business strategy, contributing to long-term resilience. Partnership solutions were also highlighted as effective means to identify and address emerging risks, utilising real-time data to anticipate future developments. One particularly pertinent emerging risk mentioned by the panel was wildfires, which impacted regions like New York, Vermont, and New Hampshire due to smoke from wildfires in Canada earlier this year.