Rekerdres & Sons: Black swans, grey rhinos and cockroaches

Adam Rekerdres, vice-president at Rekerdres & Sons Insurance Agency Inc., on ways of looking at risk and why captives ensure a higher level of strategic risk management in an increasingly uncertain world


What do black swans, grey rhinos and cockroaches have in common? They’re all a way of looking at risk, says Adam Rekerdres.

Rekerdres has vast experience of risk and insurance, having worked at the family business Rekerdres & Sons Insurance Agency Inc. since childhood. He is the current vice-president. It is that level of experience that made him well placed to be a panelist at last year’s Bermuda Captive Conference on the session topic of Captives, risk management and the cost of capital.

Exploring the risk management part of the session, Rekerdres explains ‘black swans, grey rhinos and cockroaches’ in more detail. He says: “A grey rhino is something that we can see in the distance. It’s big, it’s ugly, it’s possible that it could happen. And when it does happen, it’s coming for us, full speed ahead.

“The cockroaches are the little claims. Nuisance claims that we just can’t seem to exterminate. Maybe we account for them, or maybe we don’t, but when you turn the lights on in the room, they just run into the cracks,” he explains.

The most well known of the risk metaphors is the black swan. It was made famous by author Nassim Nicholas Taleb, who believed that hard-to-predict and rare events are some of the biggest shocks that will impact society.

Rekerdres points to cyber risk as a potential black swan.

“You can really get creative about the Doomsday scenario, and these days insureds are seeing the cyber black swan morph into a grey rhino,” he says.

The different risks described here are exactly what risk managers and insurance buyers have to think about when they participate in a captive. Rekerdres stresses that this is one of the great strengths of having a captive.

It forces the risk managers and insurance buyers to really scrutinise and assess their risk. It also helps prevent ‘hindsight bias’, which is when companies only really analyse the risk after the event has happened.

“For risk managers, it begs the following question: why weren’t we strategic about this? Why didn’t we address it in that way? That’s hindsight bias. It’s already happened. Captives help flush that out because when you have an insurance company in place, you absolutely have to look at every risk,” he explains.

“Risk managers actually have to account for the risks, price them, be aware of what tools they have, how to use them, why it’s important and how it’s going to help them… and that is a higher level of strategic risk management.

“So many times when a captive comes into play for a company, they truly discover a new dimension of enterprise risk management. Instead of just talking about these risks with the captive, they have to account for them.

“They have to price it, keep track of it. The captive – based on its ability to account for risk – is either going to be profitable or not. This really brings a new level of enterprise risk management to the table because it becomes not just a conference room discussion of coming up with dreamy black swans and grey rhinos, but a very strict discussion of pricing and planning,” Rekerdes adds.


Now is also the time to understand and manage risks via a captive as the world enters a more uncertain phase.

Companies have suffered a supply-chain shock following the Covid-19 pandemic. Then came the war in Ukraine, a factor in rising inflation and economic stress. These bring about new challenges and risks. Emerging risks such as climate change, reputational and cyber were growing before the pandemic and Russian-Ukraine war.

Furthermore, companies are now facing the prospect of a harder insurance market. Rekerdres is on the front line, dealing with clients throughout the year.

Rekerdres & Sons Insurance Agency Inc. specialises in cargo insurance. Rekerdres is also principle at Rekerdres Administration and Management Services, which handles captive insurance management and claims.

What is he seeing in terms of the relationship between insurance buyers and insurance firms in this challenging period?

He says: “I had a question recently from another publication, which said: ‘As a broker, how are the captives being received by the commercial market? Is there an antagonistic relationship between the name brand insurance companies and the insurance buyers putting in place their own insurance companies to retain risks in response to the hard market?’ And my answer is that actually, it’s helping the relationship a lot because, in this hard market, insurance companies are wanting more premium, higher deductibles, and restricted coverage.

“For example, the easiest way to offset more premium is through higher deductibles, and captives help the relationship because these higher deductibles are more easily accepted. Not only are they being accepted but they’re also being managed well. So, it helps the insurance company to know that not only is there a formal risk management plan in place to manage these risks that are within these higher deductibles, but the customer is accounting for these risks, is onboarding these risks in a very formal way, with a risk management plan that has consequences. This signals a more sophisticated insurance buyer which brings comfort to both parties and really helps the relationship,” he notes.

Asked about how accessible capital is to support companies looking to set up captives, Rekerdres says: “Honestly, that’s a tough question. For me, I would like to say this: it’s constrained in the sense that there are more and more captive owners that have come about because of the hard market. They want their captive to grow, and they realise that means they may need to offload some of their captive risk. The reinsurance market for captive owners is constrained in its ability to accommodate medium-sized captive companies.

“The reinsurance market as it stands today is really built for large captives owners. I would say there is need for the reinsurance market to partner with medium-sized captive owners who don’t want to pool their risk. That has been difficult to find so far.”

Parametric insurance

Amid these hard market conditions, there has been talk that companies are also looking for new innovations to help manage their risks.

Parametric insurance, when a claim is triggered on pre-defined data thresholds and paid almost instantly at an agreed level, is capturing the imagination. Rekerdres says the hard market is bringing these ideas forward for discussion.

“What the hard market has done is opened up insurance buyers to different forms of insurances. For example, with property insurance, if we really look at it, the property insurance model is a very old model. On the other hand, parametric, in terms of how the risk is priced and how a claim is paid, is something that’s totally new, and people are open to hearing about that.”

With all these opportunities for captives, Rekerdres firmly believes that Bermuda remains one of the best places in the world for captive management.

He uses the analogy of an airport, where planes are the captives coming into land, the air traffic control is the regulator and the airport itself is the domicile. He says: “Bermuda is the oldest captive airport in the world.

They have the best air traffic control tower in the world. They are the most international in the world and most accommodating.”

He describes the regulatory environment as “open ears”, “accessible” and “with expertise”. With his knack of making complex topics understandable, and deep experience in captives and insurance, Rekerdres’ panel session at the end of last year’s Bermuda Captive Conference was an event not to be missed.

12 August 2024
5-6 November 2025

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