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stakeholders’ needs,” he said. “Added
to that, the confluence of the multiple
aspects of the coverage and the relatively
new exposures as well as the lack of a
holistic marketplace make them a prime
candidate for captive utilization.”
Tina Summers, senior vice president,
Marsh Captive Solutions, added that
the uncertain regulatory environment
for sharing economy companies has
also caused concern among insurers.
“This has resulted in a limited
number of markets willing to write the
risk, limited availability of capacity and
high premium pricing,” she said. “Over
the past few months, we have seen some
new entrants to the market with appetite
for sharing economy risk; however, we
expect coverage and pricing flexibility
to remain reasons for companies in this
negotiating with commercial insurance
markets,” she said. “It may also
improve unit economics due to the
flexibility a captive allows.”
Captives also enable these firms to
craft their own manuscripted coverage
language and to determine their
own pricing, said Thad Hall, partner,
business development at Y-Risk,
a managing general underwriter
specializing in the sharing economy.
Y-Risk is currently in the process of
setting up its rent-a-captive facility.
There are additional benefits for
companies to consider, said Hall.
“Several insurers had a tough time
after the recession and pulled back on
coverage or pulled out altogether, but
being in a captive enables companies to
avoid these types of cycles.”
Captives also offer the advantage
of a policy that doesn’t need to be
constantly underwritten every year,
said Jillian Slyfield, managing director
at Aon Risk Solutions.
“You can tweak it every quarter
or as required and make the changes
needed to enable the company to grow
and grow quickly.”
Everett added that captives
are a good fit for the culture and
entrepreneurial spirit of sharing
economy companies, while giving
greater control to the parent company
and offering a significant risk/reward
based incentive too.
“The parent company can control
how claims are handled and their
premiums are developed utilizing an
actuarially developed loss pick which,
if given enough history, should predict
future losses accurately,” she said.
She added that captives also allow
companies to insure the risks they
previously carried on their balance
sheets as policy exclusions on standard
policies such as wage and hour
coverage and cyber risks.
Rider concluded that a captive’s
key selling point is allowing these
companies to aggregate multiple
risks across different portfolios, while
enabling them to buy reinsurance from
markets that have a track record of
providing capacity across P&C, A&H
and personal lines.
“Captives create the opportunity
to consolidate a company’s diverse
cross section of risks in one place and
to then build a reinsurance structure
that can accommodate that unique risk
portfolio,” he said. “This enables them
to craft an insurance program that
connects with their stakeholders’ needs
and to create an optimal risk transfer
ALEX WRIGHT is a U.K.-based business
journalist, previously the deputy business
editor at The Royal Gazette in Bermuda.
You can reach him at firstname.lastname@example.org.
space to look at captives.”
IDEAL SOLUTION FOR UNIQUE RISKS
For those companies willing to take
on their own risks, Summers said that
captives are a viable solution, enabling
them to finance coverage for these
risks in a more cost effective way.
“Funding of retained risk in a
captive may provide leverage when