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Increasing number of firms using captives to finance emerging risks: Marsh

5th June 2018 - Author: Charlie Wood

Leading insurance broker and risk management solutions firm, Marsh & McLennan, has released a report that reveals captive insurance vehicles’ growing popularity among risk managers seeking alternative ways to finance emerging risks.

1,100 captives managed by Marsh Captive Solutions globally were examined by Marsh’s 2018 Captive Landscape Report.

The study found a rise of 240% from between 2012 to 2017 in the number of Marsh-managed captives writing cyber liability. While in the same period the number of captives insuring employee benefits across multiple geographies grew by 550%.

The number of captives writing terrorism coverage, backed by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA), also saw a significant increase between 2012 and 2017, of 83%. The report found that there were numerous organisations examining their captives to see if they can take advantage of TRIPRA, which can also be used to cover cyber-terrorism perils in the United States.

60% of captive owners surveyed maintain their captive as a formal funding vehicle to insure risks that the parent company has decided to self-assume, according to Marsh’s report, while 42% said it was to provide access to the reinsurance market.

Strong year-over-year growth in captives in the Asia-Pacific region since 2012 was also noted. Last year, Marsh recorded a 24% increase in the number of Marsh-managed captives in Asia-Pacific, largely driven by parent companies based in Japan, China, Hong Kong, and Singapore.

“As the global risk landscape becomes more complex, organisations are increasingly using captives to help accelerate their corporate objectives, reduce volatility, protect human capital, and boost financial certainty,” commented Ellen Charnley, President of Marsh Captive Solutions.

She concluded, “Captives offer unrivalled flexibility in financing emerging and high-severity risks, such as cyber risks, terrorism, and employee benefits. We expect this growth to continue, as more organisations adopt innovative new ways of placing captives at the core of their risk management strategies.”

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