Foreword
Creative new uses of captive insurance are fuelling market growth
Dan Towle, president of the Captive Insurance Companies Association, explains what’s driving the captive insurance market in 2023.
“CICA provides education and networking opportunities that have created a supportive community for young and new captive insurance professionals.”
Dan Towle
CICA
COVID-19 taught all of us that we are capable of adapting and changing more rapidly than we had believed possible. This acceleration appears here to stay. While not as intense as in the early days, we are all more aware of what’s possible and we are more comfortable using technology to get there.
This acceleration is clearly evident in the captive insurance industry, where creative strategies for captive expansion are helping organisations address a myriad of challenges. With continuing price increases and less capacity in the commercial insurance market, unprecedented supply chain disruptions, and increasing liabilities and reputational risks, we have an environment where captive insurance thrives.
For 2022, recent market studies revealed more than $100 billion in premiums was written through captives domiciled in the US alone, and an estimated 90 percent of Fortune 500 companies own at least one captive insurance company.
Growing and diversifying captives
The trends of growth and diversity for captives are continuing. Many of the top US captive domiciles licensed more new captives in 2022. We are seeing more property and cyber risk being added to captives. Some types of captives such as cell captives have seen an uptick in usage and we expect this trend to continue.
We also see strong interest in captives for directors and officers coverage (D&O). Directors and officers of companies are increasingly aware they could face significant legal action. A captive allows them to tailor coverage to potential issues and liabilities they might face, including environmental, social and corporate governance (ESG) liabilities, that are being excluded in traditional policies. An industry study revealed that 20 percent of non-captive owners are considering forming a captive for D&O liability insurance.
New technology, better data and evolving risk strategies are giving captives the edge in providing coverage ahead of what the commercial market can provide. However, not all growth is in new captives. Even if another captive is not formed for the next five years, I would fully expect the gross written premium to increase year over year as the use of captives continues to grow with increased retentions and new lines of coverage added to the captives.
The future of captives involves more than just large businesses. The mid-market has tremendous opportunities for growth as these organisations address the same hard market, business and economic issues as do big ones. Increasing insurance costs, supply chain disruptions, cyber attacks and other market-specific drivers are driving increased interest in captive insurance solutions for companies of varying sizes.
Developing captive talent
All these creative opportunities for captive industry growth are exactly why I am excited to see more young professionals entering the marketplace. Their enthusiasm, tech knowhow and fresh ideas will help drive future innovation and growth for the captives industry. The innovative nature of the sector provides career opportunities for a wide range of degrees along with insurance and risk management.
Our industry needs people with marketing, accounting, finance, law, and general business degrees. This is why the Captive Insurance Companies Association’s (CICA) NEXTGen, Amplify Women, Essay Contest and Mentorship programmes are so important. CICA provides education and networking opportunities that have created a supportive community for young and new captives professionals to grow personally and professionally.
Accelerating learning and networking
With so many opportunities for new formations and the growth of existing captives, there is no better way to stay ahead of the game than by joining captive industry associations such as CICA or your local domicile’s association. Becoming a member and getting involved is a great way to learn while building your network.
Attending industry events such as CICA’s International Conference provides opportunities to learn and network with leading experts and captive owners in our unique domicile-neutral environment. It’s a collaborative, supportive community where everyone shares creative strategies to address today’s market challenges and tackle future risks with captive insurance.
CICA is a huge supporter of the International Center for Captive Insurance Education (ICCIE) where you can further your captives knowledge throughout the year and work towards your Associate in Captive Insurance, better known as ACI. This is a tremendous way to further your captives knowledge for yourself or your employees.
Staying vigilant
It is easy to get excited about the wonderful growth we are seeing in the marketplace, but we must never lose sight of ongoing threats. As our industry grows, we become a larger target for people and entities that don’t understand what captive insurance is and the benefits it provides for companies to better manage their risk. Whether it is the Internal Revenue Service or the Organisation for Economic Cooperation and Development, our industry needs to be better understood.
Contributing to better understanding is something each of us can do. As an association, CICA takes a leadership role in promoting and defending the industry. As individuals, if you have a chance to talk with an elected official about what captive insurance is and is not, please take advantage of that opportunity. If you have an opportunity to make an impact on a young professional by sharing the great career paths in captive insurance, please take advantage of that opportunity.
We are a growing industry and we can all play an important role in keeping the future bright for captives.
To contact the Captive Insurance Companies Association visit www.cicaworld.com/
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