Lane Shift for Trucking Risk
A shrinking insurance
market drives interest
in captive solutions
for the transportation
By Alex Wright
A steep rise in claims severity forced many insurers to pull out of the commercial automotive market.
Today, there are more vehicles on America’s roads than before, driven by a trucking industry that grew exponentially to meet increased consumer demand. Add in the advanced average age and subsequent deterioration in truckers’ health, the increased use of cell phones and more highway
construction projects, and that resulted in a huge increase in accidents in recent
The number of crashes involving large trucks alone climbed by 9 percent
between 2011 and 2014, according to the U.S. Transportation Department.
As a result, commercial auto insurance rates spiked, some by as much as 30
percent in 2016, and they are expected to climb further this year.
Fitch also reported last year that the commercial auto sector is a “chronically
underperforming segment” due to overly aggressive pricing and a steep rise in
claims severity, prompting many insurers to pull out of the market.
All of these factors, when added to already tight margins and other economic
pressures including driver costs, forced many trucking firms and companies with
large vehicle fleets to turn to captives to spread their risks and reduce insurance
Captives also provide access to ancillary lines of coverage and limits, return
of underwriting profits, improved risk management practices and the ability to
manage marketplace fluctuations.
Geoff Welsher, managing director at Marsh, who runs two offshore captives,
said that the increased interest in captives for commercial auto insurance is driven
by a combination of some insurers pulling out of the market and others increasing
Of most interest, he said, were group captives specializing in trucking
companies, which provide a greater level of investment in claims management and
loss control than traditional insurance coverage achieves.
Many of these captives also put a larger percentage of their premium toward
staff training and employ full-time risk control specialists, he said.
“In a group captive environment, there are all manner of board and safety
meetings and benchmarks against which companies can measure themselves,”
Rob Kibbe, executive director of Aon Risk Solutions’ transportation practice,
said that these kinds of captives appeal most to companies seeking a return on
their investment in safety technology.
He added that they also allowed owners to control their own rates and achieve
greater risk rewards than with traditional coverage.
Todd Reiser, vice president and producer in Lockton’s transportation practice,
said that the choice of captive depended on a range of factors including fleet size,
ownership and corporate structure, tax
considerations, credit capacity, estate
planning and the number of owner-operators within the fleet.
“Single-parent captives allow for
tax benefits, estate planning solutions,
more efficient use of capital and the
ability to write certain coverages in
the captive independent of insurance
market conditions,” he said.
“Risk retention groups and group
captives, on the other hand, allow the
members to share in certain risks,
purchase reinsurance and potentially
“Technology plays a large
part in safety and loss control
for commercial fleets and is
becoming more of a factor in
the underwriting process.”
— Todd Reiser, vice president, Lockton
• Commercial auto insurance rates
spiked by as much as 30 percent
• Brokers report a sharp uptick in
captive formations among trucking
• Technology advances are helping
firms rein in the frequency and
severity of claims.