Despite a recent minor hardening of rates, most captive insurers haven’t increased their retentions and the reinsurance buying programmes of most remain stable. But this could soon change due to regulatory changes and if rates continue on their upward trajectory.
Historically, soft market conditions in many lines of business, coupled with an abundance of excess capacity in the traditional reinsurance market, have proved favourable for captive insurers looking to retain less risk.
But many captives tend to adjust their reinsurance programmes and buying patterns depending on market conditions. When market conditions harden, it makes sense financially for captive insurers to buy less reinsurance and to retain more risk. However, despite a slight hardening on some lines of business of late, most captives are still buying the same amounts of reinsurance.
“Captives are generally not looking to take on more risk,” says David Gibbons, director of the captives practice at PwC. “They’re looking to place roughly the same type and level of risks that they had in the past.”
Regulatory Changes, Reinsurance Buying, PWC, David Gibbons, Urs Neukomm, Swiss Re, Bermuda Insurance Management Association, Munich Re, Airmic