Complex risks such as cyber drive demand for customised captives

The increasingly complex needs of companies is driving demand for customised captive insurance solutions, according to Steve Bauman, global head of captive programmes at XL Catlin.

Bauman, who is also on the board of director at the Vermont Captive Insurance Association (VCIA), spoke to Captive International at VCIA’s annual conference in Burlington, Vermont, which is taking place this week.

“Even though some will say we are in the soft insurance marketplace, captive growth continues not only in Vermont but also around the world,” said Bauman.

One of the themes of this year’s conference, according to Bauman, is the exploration of the number of different ways in which captives can be utilised.

“There is a saying in the industry: you’ve seen one captive programme, you’ve seen one captive programme. They’re all very customised structures.”

Bauman believes that captives have now matured enough where unpredictable risks or increased volatility can be handled within them.

“We’re not afraid of emerging risks or volatility in captives. It doesn’t necessarily need to be so predictable,” he continued. "And I think that’s a change from many years ago when you only considered putting in very predictable risk.”

With cyber in particular, Bauman suggested the ability to customise more coverage through a captive could be very appealing in the cyber area since it is emerging and there may not be a lot of information available.

However, the “bread and butter” of captive utilisation is still the multinational programmes for property/casualty, according to Bauman.

“What’s key to us is the use in the multinational area, the multinational client who needs the policies around the world that XL Catlin can facilitate,” he explained.

These captives allow the clients to put the insurance premiums around the world, distribute the cost of the insurance programme to entities outside of the US and retain it centrally, he said.

“Once a captive utilisation becomes a philosophy of the corporation, it’s expected to operate in all risks, whether they be emerging or unpredictable,” he continued.

“Captive utilisation is planning for an adverse future event. It’s always been the same in that it’s a long term thought process in risk retention and risk management.”

This article was first published on Captive International.

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