More firms using captives to finance emerging risks

More-companies-using-captives-to-finance-emerging-risks

According to a report released today by Marsh captive insurance vehicles are rapidly growing in popularity as risk managers seek alternative ways to finance emerging risks their organisations now face.

Marsh’s 2018 Captive Landscape Report examines 1,100 captives managed by Marsh Captive Solutions globally. The report found that cumulative growth in the number of Marsh-managed captives writing cyber liability rose by 240% from 2012 to 2017, while in the same period the number of captives insuring employee benefits across multiple geographies grew by 550%.

Marsh also saw an 83% increase from 2012-2017 in the number of captives writing terrorism coverage backed by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA). Many organisations are examining their captives to see if they can take advantage of TRIPRA, which can also be used to cover cyber-terrorism perils in the United States.

According to Marsh’s report, 60% of captive owners surveyed maintain their captive as a formal funding vehicle to insure risks that the parent company has decided to self-assume, and 42% said it was to provide access to the reinsurance market.

The report noted strong year-over-year growth in captives in the Asia-Pacific region since 2012. Last year, Marsh recorded a 24% increase in the number of Marsh-managed captives in Asia-Pacific, largely driven by parent companies based in Japan, China, Hong Kong, and Singapore.

Ellen Charnley, President, Marsh Captive Solutions, commented: “As the global risk landscape becomes more complex, organisations are increasingly using captives to help accelerate their corporate objectives, reduce volatility, protect human capital, and boost financial certainty.

“Captives offer unrivalled flexibility in financing emerging and high-severity risks, such as cyber risks, terrorism, and employee benefits. We expect this growth to continue, as more organisations adopt innovative new ways of placing captives at the core of their risk management strategies.”