Creative solutions for challenging covers

I have been in the captive insurance space for the past 20 years, and I can safely say it is one of the most fascinating in the entire industry. Since my early days, and subsequently through my current role at Crum & Forster (C&F), I have learnt that there are no one-size-fits-all captive solutions, nor are there run-of-the-mill clients. In essence, every captive has its own qualities.

There are two reasons why an insured desires a captive: either the programme’s results are so successful that the insured wants to take on the risk(s) itself, or there is a lack of market capacity, which leaves the insured with no traditional guaranteed cost solution. Either way, these are the types of deals or situations that we seek.

I have worked as an underwriter putting single parent and group captive programmes together, with a primary focus on property & casualty (P&C) lines of business. In 2010, I left the fronting carrier space (along with C&F colleague James Obregon), to create a managing general agent (the former Trinity Risk), which focused on occupational accident insurance. Subsequently, in October 2016, Trinity was acquired by C&F.

Following the C&F acquisition, I spent two years overseeing the company’s occupational accident division and, after a couple of years building the business, I sought a more creative and challenging role within the organisation. So, at the beginning of 2021, I launched a new initiative—one that is squarely focused on fronting both traditional and complex deals.

Along with well-respected industry veteran Mark Srygley, we have created a captive initiative focused on fronting unique opportunities. Our target programmes are ones that are non-traditional, rather than those competing on workers’ compensation, general liability and auto liability group captives—a space already saturated with many high-quality fronting carriers.

Rather, our client-first focus is writing programmes that are distinctive in structure. It may be that the insureds require or desire a particular reinsurance structure, or they need particular coverage for which there is no solution using a traditional guaranteed cost insurance product—either because of a lack of capacity, or because a form of coverage is not readily available.

Typically, the need is for a surplus lines, general liability product or some sort of contract liability insurance policy (CLIP). Generally, this structure is with a captive reinsuring and collateralising all the way up to a policy aggregate.

Where there is no policy aggregate, we will typically implement an overall programme aggregate and reinsure and collateralise all the way up to the programme aggregate. As a captive is typically a finite instrument with respect to capital, we will generally require collateral for all the captive’s exposures.

Beyond purely fronted deals, C&F is continually looking to take risk on deals where we can write both accident & health (A&H) and P&C—thus making our solution both strong and creative.

For example, we could provide a solution for a programme that is seeking to put both its P&C coverages, such as workers’ compensation, general liability and auto liability, into the same cell and share the same aggregate with its employee benefits, including self-funded health insurance. This is not typically done in the marketplace for myriad reasons.

For most fronting companies, the A&H business is in a different building in a different city with a different reporting structure from the P&C lines. While some of this is true with respect to C&F, we are a very flat organisation with regular communication and coordination throughout the company.

Importantly, we have the structure, expertise, and desire to coordinate complex deals that involve different parts of the organisation because we feel it gives us a competitive advantage.

David Kaplan is vice president, captives & gig economy, at Crum & Forster. He can be contacted at: david.kaplan@cfins.com