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Conclusions and Random Tidbits from the 2016 World Captive Forum

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February 08, 2016

Attendance at the World Captive Forum grew significantly this year with approximately 375 registrants, exhibitors, and speakers. This included about 125 captive owners. Overall the participants were enthusiastic and optimistic. Although a large percentage of new captives are smaller micro-captives, the numbers are growing. This was the Forum’s 25th year, and in his welcoming comments Business Insurance editor Gavin Souter pointed out that the number of captives has grown from about 2,800 in the early 1990s to more than 7,000 today.

During that same period of time, the number of captive domiciles has also grown from a handful to 70 or more today. This being a domicile-neutral conference, many domiciles were in attendance as exhibitors or simply attendees, including Bahamas, Barbados, Bermuda, British Virgin Islands, Delaware, District of Columbia, Hawaii, Missouri, South Carolina, Utah, and Vermont. One of the interesting developments in recent years is the increasing competition between the various domiciles. The most serious domiciles seek a good balance between solid regulation to ensure solvency and ease of doing business. There is a tension between these two goals that requires careful navigation.

A few interesting musings and observations from this week of captive education and networking:

  • The term "alternative market" is antiquated because captives are now mainstream.

  • Insurers and reinsurers are realizing that it is no longer wise to consider captives as adversaries. Instead they must find ways to partner with captives and do business with them.

  • While captives may be mainstream, they are viewed with distrust by many state insurance regulators (outside the states that are domiciles), the mainstream press, and some in Congress.

  • The insurance and reinsurance markets are likely to remain soft for the foreseeable future.

  • Insuring medical stop loss in captives has picked up steam and is one of the hottest areas in the captive industry.

  • The reality of cyberrisk has sunk in. It's at the top of everyone's radar, and many captives will be providing some form of cybercoverage in the future.

  • Everyone wants to put more benefits in captives, but it's a slow process.

  • Having one or more independent directors on a captive's board is a "best practice."

  • Some captives are focusing on good corporate governance, and this can provide a helpful boost to the image of captives (and possibly deductibility of premiums).

  • Captives can be very useful tools for implementing an enterprise risk management program.

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