Types of Coverages

With emerging risks and new technologies, the captive insurance and the broader insurance industries were already experiencing significant pressure to change before the COVID-19 pandemic. A session at the Vermont Captive Insurance Association's 2020 Virtual Conference examined how the pandemic and emerging risks promise to accelerate many of those changes.

Cyber risks are increasing, and organizations shouldn't assume that risk transfer will solve their cyber risk issues, according to one expert speaking at last week's Vermont Captive Insurance Association (VCIA) Virtual 2020 conference. Insurance is an important part of managing cyber risks, but organizations must take other steps as well.

The cyber risks confronting organizations continue to grow, and captive insurance companies are playing an increasing role in managing cyber exposures. The COVID-19 pandemic has increased cyber risks for many organizations as employees are forced to work remotely, making the need to address the exposure even more critical.

Direct written premiums paid to US cyber insurers grew 11 percent year-over-year in 2019 to $2.25 billion, according to A.M. Best. Still, the rate of cyber insurance premium growth slowed for the fourth straight year.

While captive insurance companies are most often used to insure traditional exposures and insurance risks, they can also be used to insure just about any risk to which a parent company is exposed.

Captives can play an important role in addressing emerging risks such as cyber risks or with volatility such as that seen with property risks, according to Steven Bauman, head of AXA XL's global programs and captive practice in North America.

Aon has launched a new underwriting platform offering what the company says is the largest known delegated capacity for intellectual property (IP) liability risks. In 2018, Aon announced the development of an insurance facility providing $100 million in capacity for IP infringement liability exposures.

Though intangible assets are becoming an ever-growing part of many companies' value, there are significant disconnects between the way many organizations approach coverage of their tangible and intangible assets. Addressing those growing exposures could be a function of parametric coverage designs, new technology, and captive insurance structures.

The biggest advantage to writing third-party business through a captive insurance company is that it may provide a tax advantage, according to David Lang, principal, consulting actuary with Milliman. An organization may be able to defer taxes on its unpaid claim liabilities, much like an insurance company.

Faced with a hardening insurance market, owners of multifamily housing properties are now working through renewals that bring sharp increases in rates, larger deductibles, and a decrease in capacity. When addressing all these factors, owners are starting to think more about self-insuring these risks.

An upcoming webinar from Management Services International (MSI) will focus on how captive insurance companies can fill gaps in commercial insurance coverage in the face of claims resulting from the COVID-19 pandemic. The webinar, titled "COVID-19 Claims Saving Small Businesses with MSI Captives," is scheduled for noon (EST) on Wednesday, April 8.

Since hemp production became legal, it has been fast-tracked to become a unique commodity, but insurance coverage issues remain. A hybrid solution involving specialty insurance and captive insurance might be the answer.

A captive insurance company could help small-to-midsized business owners mitigate cyber risk in a cost-effective and practical way.

John Talley, captive program manager for the Missouri Department of Commerce and Insurance, breaks down captives and their applicability to agricultural insurance.

Staying abreast of trends in construction risk and insurance is no easy task. "Construction Risk Thought Leadership," a free IRMI publication sponsored by Marsh, includes 7 quick-and-easy-to-read articles based on interviews with 15 construction risk and insurance experts.

Captive insurance planning has the potential to help mitigate reputational risk as the burgeoning #MeToo movement continues to spread and more people are implicated. It is a tailored approach that could mean the difference between financial ruin and resilience.

No organization can anticipate every possible scenario that may affect its business. This includes supply chain risk. Find out how a captive insurance company can address supply chain risk factors and circumvent business interruptions.

Industries such as self-storage facilities, dry cleaner chains, and real estate face environmental risks that are not obvious and are often overlooked. Middle market businesses subject to uncommon environmental risks that may lead to significant losses could benefit greatly from the cost-effective risk coverages afforded through a captive insurance company.

In this synopsis of a recent Milliman white paper exploring the deterioration in general liability claims costs and the potential impact on captive insurers, we also offer some basic suggestions to captives on how to address this problem.

US Department of Labor (DOL) suspension of a regulatory procedure employers have used for years to get expedited DOL review of their applications to fund employee benefits through their captive insurance companies is continuing, while regulators are circulating new captive benefit funding requirements.