Captive insurers gain new role from emerging risks

Subject

The evolving insurance market.

Significance

A new approach is emerging to manage cybersecurity, demographic shifts and geopolitical risks. Corporations are increasingly using their captives -- an insurer they own and control -- in their strategy to identify, manage and in some cases, transfer these risks. The number of captives being so deployed is climbing, and many are now being set up by parent companies outside of the United States and Europe, in Latin America, Asia Pacific and the Middle East.

Impacts

• Managing critical risks such as cyber, terrorism and employee benefits on an enterprise-wide basis will increase.
• More cybersecurity risk solutions will emerge in insurance markets as insurers meet corporate demand and compete with captive solutions.
• Proactive management of critical risks will include a greater mix of captive management solutions and of traditional transfer of risk.
• New competition from 'fintech' firms could drive innovation that disrupts the sector, but efficiency should rise.