New York
12 May 2015
Reporter: Stephen Durham

Captives thinking outside the box, says Marsh

Captive insurance vehicles are increasingly being used by businesses to provide cover for non-traditional risks, according to a new benchmarking report published by Marsh, with the number of captives doing so rising by 11 percent overall in 2014.

The biggest increase came from political risk, where the number of captives that include political risk rose 83 percent in 2014. Additionally, the number of captives writing cyber liability grew 18 percent.

“As more companies use data and analytics to better quantify their emerging risks and optimise their retained risk, the utilisation of a captive to finance retained traditional and emerging risk is a logical next step,” said Christopher Lay, president of Marsh Captive Solutions.

In the US, 22 percent of the 374 US captives under Marsh management currently access the Terrorism Risk Insurance Program Reauthorization Act of 2015, by writing either conventional terrorism coverage for property damage or the excluded nuclear, biological, chemical and radiological perils.

Across international markets, the EU is continuing to see an uplift in formations driven by increasing certainty around Solvency II, according to Marsh.

The report has also claimed that other regions like Latin America, Asia and the Middle East are all experiencing “significant activity” in exploring the use of captives as risk financing becomes more sophisticated.

Financial institutions represent the largest users of captives worldwide, with 269 captives writing $20 billion of annual premium and holding a combined surplus in excess of $35 billion.

While the number of captives owned by communication, media, and technology companies ranks seventh among industries benchmarked, they generate the second-largest amount of premium totalling $3.2 billion.

The report stated that there were eight captive re-domestications in 2014, down from 11 in 2013 and 16 in 2012, once again showing no large scale trend in captives moving domiciles.

Hong Kong now has three captives and has goals of attracting many more, including companies from China, according to Marsh.

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