From: Captive International, US Focus 2020

The insurance market is experiencing intense disruption due to COVID-19, which provides a remarkable opportunity to elevate the value and unique purpose of owning a captive insurance company, says Dan Towle of the Captive Insurance Companies Association.

The hard market was already upon us when the COVID-19 pandemic hit and now experts are predicting that the hard market will continue through 2021. As a result, more organisations are exploring formation of a captive insurance company or expansion of their existing captive.

As risk managers, chief financial officers and boards of directors see the benefits of captive insurance, they begin exploring the different structures, capacity, and coverages captives can provide.

Captive insurance was a valuable solution for dealing with unique risks pre-coronavirus and will be even more beneficial in a post-pandemic world. Pandemic risks may no longer be readily available in the commercial market and if they are, they will be expensive.

What the rest of the year will bring is unknown, but we know the captives industry will remain dynamic.”

Dan Towle, President, CICA

It is difficult to know whether the reinsurance markets will be interested in this type of coverage, so for companies seeking coverage, it may be limited to what layer can be placed within the captive.

The captive insurance market has always been very nimble, and this pandemic has not significantly interrupted operations. Most domicile regulatory infrastructures are well suited to operating remotely, and they have experienced very few interruptions.