Why this is a good time to set up a captive insurance solution

Shrinking capacity arising from hard market conditions in many commercial lines have created a favourable environment for self-insuring through captives, senior Canadian executives will propose in a live webinar hosted Monday at noon ET by Canadian Underwriter.

Scheduled panellists include Patrick Ferguson, captive sales executive and senior vice president at Marsh’s Captives Solutions Group; Alonso Tello, vice president of captives and alternative risk at AXA XL Canada; and Braedy Walker, assistant vice president of captives and analytics at HUB International Canada.

In Captivating Business: How captives can work for you in the hard market, panellists will discuss the trends favouring captives, the benefits of transferring risk through captives, and some common factors in the successful creation of captive insurers.

The captive option has come to the fore in the current commercial hard market conditions in Canada.

Canada’s property and casualty insurance industry has already paid out more than $2.1 billion in claims related to natural disasters this year, which is just a tick above the average $1.9 billion they have paid out annually for damage caused by natural catastrophes over the past 10 years. That compares to the average of $422 million they paid out annually for NatCat claims over the entire 25-year period between 1983 and 2008.

Add to this the claims caused by the COVID-19 pandemic, including a number of class action lawsuits related to pandemic exclusions in business interruption policies.

For the P&C industry, the overall trend is clear: More claims, and more severe claims, have led to higher premiums, higher deductibles and much more selective deployment of capacity.

COVID has only accelerated this trend, which was already happening a year before the pandemic, brokers have told Canadian Underwriter in various previous interviews. During COVID, several carriers have chosen to withdraw capacity from classes of business such as cyber, D&O, E&O, employment practice liability and more.

And so, with commercial clients having trouble placing coverage for their risks, one option is to self-insure corporate risks through a captive insurance company.

Feature image courtesy of iStock.ca/BrianAJackson