There is a growing interest in property risk where captives are increasingly being utilised as vehicles to assume greater risk retention, according to Adriana Scherzinger, head of captives at Zurich.
Property has been one of the fastest growing lines of business written by captives in recent years, but they are increasingly taking larger property limits as a result of ballooning rates and lack of capacity in the commercial market.
Scherzinger was speaking to Captive Intelligence at the Vermont Captive Insurance Association (VCIA) conference in August, where property dominated discussions across all areas of the captive industry.
“From a carrier perspective, we’re seeing an increased use of captives as a vehicle to assume greater levels of property risk retention,” Scherzinger said.
“Weather events have become more capricious, and more locations are becoming exposed to frequent and costly natural catastrophes. The main challenge for writing property is that it is a largely volatile risk. It is usually a capital-intensive line of coverage to be included in a captive.”
She said there has been a lot of sophistication and creativity in the US when it comes to writing property through captives.
“Captives are often involved in the towers, primarily in the primary layer, and they’re also handling increased deductibles,” she said.
“But they’re also filling in gaps within the tower. It’s not that captives are always taking on all the property risk; they’re often working side by side with the commercial market.”
Scherzinger said Zurich has been observing a widening array of risks being considered in captives that goes beyond traditional insurance.
“This is where we’re seeing a significant shift in the market from alternative risk, as it was considered in the past, now into a mainstream solution,” she said.
She said she is expecting to see continued captive growth across the globe.
“In Europe, we’re seeing countries like France, Italy, and the United Kingdom actively discussing captives and their domiciles—they all want to be part of the game,” she said.
She said Pacific and Latin America are also preparing for growth.
“Here in the US, where the majority of all captives are domiciled, we are receiving many new fronting inquiries that I have not seen before,” Scherzinger added.
“The risk can be first-party or third-party, and customers are creative in how they want to use their captive programs.”