Growth will be driven by rise in non-traditional risks: Captive Alternatives
Captive Alternatives is anticipating a rise in emerging and non-traditional risks, such as cyber, reputational, supply chain and employee benefits, which it sees as among the key drivers for growth this year.
Mark Jacobs, chairman and CEO of Captive Alternatives, said: “Employee benefits, in particular, I see as a big area of growth. Employers want to stay competitive by offering excellent benefit packages, but the commercial market is so volatile that employers will increasingly move to self-insurance and alternative market options. This is the only way to control costs and benefit from investments in risk control.”
Jacobs believes an increased dependence on technology and globalisation has left companies facing more risk than ever before. “Living in such a connected world is exciting and leads to rapid innovation but we’ve also seen the dark side, with cyber-attacks, data breaches and even global health crises like the recent coronavirus spread,” he explained. “These issues are moving faster than the traditional markets can react, so risk managers have to continue to find alternative financing mechanisms.”
He also argued the hardening market will make affordable insurance coverage options more limited for business owners, pushing them to look for more alternative risk transfer options. “Business owners want to control costs and to stop subsidising poor risk management, and so they want transparency and flexibility when it comes to insurance products,” said Jacobs. “The alternative risk market exists to provide forward thinking risk managers with solutions.”
Captive Alternatives has also seen increased interest from business owners looking for alternatives to 831(b) captives in the past couple of years, said Jacobs. “Although it’s a tumultuous time for micro-captives, CapAlt has seen continued growth in recent years and we attribute that to our high client service standards and unique Private Insurance model,” he added.
Jacobs argued every business owner should be thinking about enterprise risk management in order to stay competitive and profitable. “Although our niche has historically been privately-owned small and middle market enterprises, we’re seeing more interest from larger companies,” he added.
Jacobs believes this is at least partly down to the effectiveness of the Puerto Rico insurance sector, compared to some traditional domiciles. He said: “CapAlt has always had good relationships with all the states but we find Puerto Rico stands out as best jurisdiction we’ve seen. Puerto Rico offers an unmatched combination of regulatory oversight, a favorable cost base as well as creativity, flexibility and service.”
The group has also expanded into the more traditional commercial insurance market and is working alongside a Lloyds Managing Underwriter. This new product allows small and medium-sized enterprises to reinsure most of their commercial P&C insurance into a private reinsurance structure.
Jacobs said: “This program is exciting because it now allows business owners to share the profits in their regular commercial coverage and this was previously only feasible for the largest corporations.”