Sunday, May 19, 2024

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Hard market has increased the captive value proposition – RIMS President

A challenging property market in the United States is proving a particular headache for risk professionals and captives are a good option when seeking alternative solutions, according to RIMS president Jennifer Santiago speaking in an exclusive interview on the Global Captive Podcast.

Santiago, who is also head of risk management & safety at Wakefern Food Corp, was appointed RIMS president in January. She was co-host of GCP #80.

Santiago agreed “100%” that the hard market of the past three years has only increased the value proposition of captives, citing rising retentions and shrinking capacity as the challenges that can be overcome or mitigated by captives.



“On challenged programmes like cyber and property where you’ve got gaps in coverage, and non-concurrencies in forms, having a captive as an ability to layer in and take a share or a layer, even at the top of your coverage tower, is critical,” she said.

“Buying down your deductibles for your business since often your business units don’t want to take a million dollar or a $2m or a $5m retention. So to me, I don’t know that there’s really a better alternative solution than to having a captive available to do those things for you.”

While Santiago said she had seen more innovative use of captives in lines such as cyber and D&O, she said it should not be ignored how tough the property market remains and the value that a captive can provide in support risk financing programmes in more traditional lines of cover.

“I don’t know what to make of the property market anymore,” she added saying it had almost become “untenable”.

“The options on property are so, so slim and it’s not surprising to look around and see the level of property catastrophic losses that are going on and the frequency, the severity have just increased.”

Santiago said all of the risk management peers she has spoken to are struggling for solutions with parametric policies and catastrophe bonds increasingly under consideration in the search for appropriate cover, while captives remain a good option.

“Captives are another alternative, of course, to layer in on your property programme,” she added.

For risk professionals, understanding the changing risk landscape and putting in place effective risk mitigation and prevention measures are crucial, as well as ensuring there is a financial backstop in place.

“So I think property is one that we may see more organisations putting different extents of layers into the captive where they can afford to take that cat risk.”

Listen to the full GCP #80 episode here, or on any podcast app. Just search for ‘Global Captive Podcast’ on your platform of choice and click ‘follow’ or ‘subscribe’.