30% increase in EB & cyber captives: Marsh

A Marsh report has found that employee benefits and cyber lines in captives have increase by more than 30%.

Marsh’s annual Captive Landscape Report uses statistical analysis to track captive industry trends.

The latest report found that there has been a 30% increase in cyber lines and a 27% increase in employee benefits in captives.

The report also found that regulators were open to captives writing cryptocurrency lines.

“More captives are writing cyber insurance, according to regulators, who saw that trend as both an opportunity and a threat,” the report states. “They said the threat comes from the additional risk it presents to captives, as well as the governance and compliance it requires.

“Nearly all regulators surveyed were open to the use of cryptocurrencies in captives, but 21% expressed uncertainty about its regulation.”

As well as cyber and employee benefits, professional indemnity and environmental lines are also seeing increases.

Captive use overall is increasing, according to the report, in response to the hardening market and impact of the Covid-19 pandemic.

“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,” Ellen Charnley, President of Marsh Captive Solutions said.

“While none of the new captives formed so far in 2020 specifically cover pandemic-related losses, organisations are using their captives to help navigate them through the global Covid-19 pandemic.

“Financial flexibility is one of the key advantages of owning captives, and 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.”

In addition, Marsh found that 59% of current captive owners were planning to expand their captive by either forming another captive, adding more lines or increasing retentions in their captive.

This is in part due to global insurance prices in the traditional market which have, on average, risen every quarter since the fourth quarter of 2017.

The report found that rise has been sharper in the last year, with prices rising 11% in Q4 2019, 14% in Q1 2020 and 19% in Q2 2020.

US domiciles have seen a much sharper rise in captive registrations, with US domiciles seeing a 20% increase in captives in the last five years compared to a 1% increase in global domiciles.

12 August 2024
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