Captive Trends and Developments Discussed at TxCIA Meeting

Several speakers at the 2023 Texas Captive Insurance Association (TxCIA) annual meeting discussed trends and developments. One of the most complete lists was offered by Mike Douglas, director of business development for Aon Captive and Insurance Management (pictured).

Property insurance. Historically, captives were used primarily as a casualty risk financing solution. The hard insurance market has motivated companies with significant property risks to cover their exposures in captives, particularly when they have catastrophe risk exposures.

High-level excess and umbrella layers. Using captives to fill in layers in a tower that are deemed overpriced by the marketplace or where there simply is no market capacity is another recent development. In the past, captives generally were used only in the lower layers, where claim frequency yielded more predictability.

Increased interest in getting captives rated. Captive owners have had little reason in the past to have their captives rated by one of the rating companies, such as A.M. Best. Mr. Douglas is seeing more interest from captive owners who are required to meet contractual requirements for a minimum rating. He's even had companies that are looking at captives for the first time factor in the possible need to secure a financial rating.

International benefits. Captives are being used to provide a standard set of benefits to all employees regardless of the region in which they are employed. Providing a consistent benefit package helps meet the "social" responsibility portion of the environmental, social, and governance equation.

Medical stop-loss. This trend began some time ago and continues; it remains a good option for companies with good loss experience.

Cyber. Companies are considering the use of their captives to provide coverage at the top of a tower or to fill in gaps in their cyber-insurance coverage obtained from insurers.

Third-party business. Since the dawn of captives, many a risk manager has dreamed of turning their captive into a profit center. Mr. Douglas is seeing more of this in the current market as captives explore the possibilities with such lines as warranty coverage, renters insurance, and even auto packages. "But tread carefully and know your policyholders well," he warned.