Captive insurance uptake rises amidst ongoing 2020 pandemic threats
Marsh formed a record 76 new captive insurance companies between January and July this year.
As the global pandemic continues to disrupt economic conditions and create new risks — even before COVID-19 — more organizations are turning to the use of captives for insurance protection and financial flexibility, according to a new Marsh report.
In its recently released 2020 Captive Landscape Report, Marsh informs that a tightening of global insurance market conditions in 2019 led to a growth in captive use, paired with premium volume growth across several coverage lines.
Marsh’s 2020 Captive Landscape report sourced data from 1,240 of its managed captives globally. According to the report, supply chain, business interruption, and contingent business interruption premiums written by Marsh-managed captives rose 283% on average in 2019.
All-risk property premiums rose 64% on average, Marsh found, led by the energy and financial institutions sectors, which saw all-risk property premiums increase 151% and 104%, respectively.
Growth in captive use accelerated by COVID-19
This trend only grew more prominent in the first half of 2020, fueled by the impact of the global COVID-19 pandemic on the insurance market and businesses across all different industries.
According to Ellen Charnley, president of Marsh Captive Solutions, Marsh formed a record 76 new captive insurance companies from January through July this year, up over 200% compared to the same period in 2019.
“While none of the new captives formed so far in 2020 specifically cover pandemic-related losses, organizations are using their captives to help navigate them through the global COVID-19 pandemic,” Charnley said in a statement.
“Financial flexibility is one of the key advantages of owning captives, “Charnley said. “Since March 2020, Marsh has helped owners free $3 billion from their captives using short-term liquidity tactics, such as intercompany lending, to help them respond to cash-flow challenges brought on by the pandemic.”
Marsh’s client survey found that a majority of captive owners plan to increase their use of captives as insurance market conditions continue to evolve.
Nearly 60% said they plan to expand their captive use by either adding more lines of coverage, increasing retentions in the captive, or forming an additional captive. Approximately 38% of the respondents did not plan to make changes.
Find the full Marsh 2020 Captive Landscape Report online.
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