The ongoing COVID-19 pandemic has caused “major uncertainty” across the hospitality industry in regards to policy exclusions, lack of capacity and affordable coverage, but captives could hold the answer for future planning, according to experts from HUB International.
John Yaple, director of captive marketing, HUB International, said: “Ideally a well-established captive would have the capacity to provide financial protection for the current events, however, it is even more important to start planning today for ways to enhance your risk management programme for the future.”
Yaple suggested that the hospitality industry should look to captives as part of future plans to protect against events such as the ongoing pandemic.
He noted: “While captives have proven to be a valuable risk financing mechanism during standard business operations, they can be especially impactful during turbulent times like we are facing today.”
“Establishing a captive at the core of your risk management programme will put you in control over how you finance your risk through difficult times”, he added.
Also highlighting the benefits of a captive for the hospitality industry, Kevin Eggleston, managing director, HUB hospitality and real estate practice, said: “In the best of times, owning a captive can be a very compelling means of far more cost-effectively financing a hotel management company’s standard anticipated exposures such as workers comp, general liability, and auto.”
“In the worst of times, a captive can fund a far broader set of risks including those exposures which are typically excluded by a standard insurance company policy.”
“Captives can fund a myriad of unique exposures or ‘buy down’ deductibles that are difficult if not impossible to transfer to a standard admitted insurance company. There may also be potential advantages of having ‘premiums’ paid to the captive cover certain ‘claims’ which may not otherwise be insurable or tax-deductible,” Eggleston added.
Eggleston highlighted that the time to prepare for COVID-19 was “likely years ago” however, “the time to prepare for the next major devastating economic event, whatever that may be, is now”.
