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AM Best: Cell Captives Provide Coverage Opportunities for Smaller Companies (AM BestTV)

In this episode of AMBestTV, with the Vermont Captive Insurance Association’s (VCIA) virtual conference underway, Dan Teclaw, senior financial analyst, AM Best, said overall financial results for AM Best-rated captives remain favorable. Click on http://www.ambest.com/v.asp?v=ambcaptives820 to view the entire program.

Teclaw addressed whether there has been any discernible impact on captives from the pandemic.

“AM Best has not really seen any impact at this point,” said Teclaw. “Of course, it is early and things are continuing to develop, but captives have not really had any type of layoffs or anything. Obviously, premiums are down, which are related to shutdowns, as well as claims and frequencies.”

Teclaw also highlighted whether the crisis will spur any new strategies.

“I think companies are continuing to look for new ways to either use their captives for new lines or to form new captives,” said Teclaw. “I think there will obviously be some consideration for how they will manage their business interruption risk going forward, as well as whether they will keep retentions and those type of things. Certain structures are also being floated or bandied about with some cell captives.”

Going forward, Teclaw believes captives are going to face challenges on pricing adequacy in order to preserve the strength of their balance sheets to cover losses that they may have.

To access the related market segment report, titled, “Commercial Market Dislocation Could Provide New Opportunities for Captives to Fill the Void,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=299661.

Additional coverage of the VCIA’s virtual conference, which runs Aug. 11-13, is available at:

  • Pandemic-Related Exposures, Market Conditions Create Openings for Captives: Captive insurance leaders, analysts and regulators said changing business needs and a less-accommodating commercial market are prompting organizations to consider new coverages and strategies for captive insurance companies: http://www.ambest.com/v.asp?v=captives_covid820;
  • Vermont’s Provost: In Time of Stress, Sponsors Tap Captives for Relief: David Provost, deputy commissioner, Captive Insurance Division, Vermont, said some sponsors of captives domiciled in that state have turned to their captive to help alleviate financial crunches during the recent pandemic: http://www.ambest.com/v.asp?v=provost820;
  • VCIA’s Smith: Pandemic Shows Captives Can Better Respond to Sponsors’ Risks: Rich Smith, president, VCIA, said market insurance products often exclude risks that captives are better positioned to cover: http://www.ambest.com/v.asp?v=rsmith820;
  • Pinnacle’s Walling: The Current Crisis Is ‘Information Looking for Data’: Rob Walling, principal and consulting actuary, Pinnacle Actuarial Resources, said insurance pricing was already shifting prior to the COVID-19 pandemic: http://www.ambest.com/v.asp?v=walling820; and
  • Marsh’s Charnley: PRIA May Offer Captives a Path to Pandemic Coverage: Ellen Charnley, president, Marsh Captive Solutions, said the proposed federal Pandemic Risk Insurance Act would help provide a backstop to all licensed insurers, including captives: http://www.ambest.com/v.asp?v=charnley820.

AM BestTV covers exclusive AM Best and insurance industry information and reports, targeted topics and key developments in the insurance, reinsurance and related sectors daily. Sign up for alerts of episodes at www.ambest.com/multimedia/ambtvsignup.html. View AM BestTV episodes at www.ambest.tv.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts:

Lee McDonald
Group Vice President, Publication and News Services
+1 908 439 2200, ext. 5561
lee.mcdonald@ambest.com

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