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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Captive Insurance and Reinsurance for Health Care Topic of Bermuda Development Agency Webinar

Doctor Stethoscope
October 02, 2015

The healthcare insurance market is in a state of flux, and Bermuda is uniquely positioned to benefit, according to the three speakers at the "Healthcare Captives and Reinsurance" webinar sponsored by the Bermuda Business Development Agency (BDA) September 30, 2015.

Oceana Yates, vice president, captives, R&Q Quest Management Services Limited Bermuda, started the webinar by providing an overview of captives and how they are classified in Bermuda. She pointed out that healthcare captives tend to write two major risks: high-severity medical malpractice and/or high-frequency general liability.

Butch Agnew, vice president, Dyna Management Services Ltd., followed by providing a synopsis of the healthcare captives and reinsurance markets in Bermuda. There are currently 96 licensed healthcare captives operating in Bermuda. Collectively they write $1.3 billion in annual premiums, which represents approximately 12 percent of the premium written by captives in Bermuda. Backing up these captives is a vibrant reinsurance market, he said, with more than $400 million in capacity among 10 insurers with 40-plus healthcare insurance professionals.

Mr. Agnew went on to highlight some trends and challenges faced by the healthcare captive industry. Medical malpractice insurance has become more profitable over the last 10 years, driven in part by the release of redundant reserves. Since 2009, surplus has increased at an 11 percent annual rate. But times are changing, he said. Price competition is increasing, resulting in lower premiums and softening rates. More physicians are now employed as part of large hospital groups, meaning there are fewer physician-only practices. Merger activity is also on the rise, and both trends are helping to reduce potential buyers and leading to increased rate pressure. Additionally, the impact of the Affordable Care Act in the United States is only starting to be felt, he said, and it remains to be seen how big an impact this legislation will have.

Anne Sousa, senior vice president, casualty health care, Aon Risk Solutions Bermuda, rounded out the discussion by discussing the reinsurance market. Similar to the challenges faced by the captives, she said, healthcare reinsurers are going to have to adapt to survive. Reimbursement percentages are falling, while healthcare costs are rising. This creates pressure to cut expenses, she said, while at the same time provides sufficient capital to fund for the future during a time of expanded healthcare coverage for millions of people who lacked medical insurance in the past.

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