For captive owners, structured risk solutions (SRS) can provide greater certainty by moving away from annual renewals and towards a multi-year approach, according to AXA XL’s Joe Filby and James Donald, of Lockton who discussed the subject on a recent episode of the Global Captive Podcast.
A structured programme can be tailored to a company’s needs, with risk-sharing arrangements between the company and the insurer.
As a result, captives are utilising SRS to take greater control of their risk financing, providing greater stability, flexibility, and protection against market-cycle volatility.
The approach comes even as the insurance market has generally become more buyer-friendly, with capacity available, and clients having more options than in recent years.
“Through an SRS solution, we can change that conversation to instead of annually, what is it going to be for the next multi-year period?” Joe Filby, senior underwriter within structured risk solutions at AXA XL in the UK and Lloyd’s, told Captive Intelligence.
“We can give a fixed cost which will not change based on loss experience or any sort of external market factors outside of your control. It is going to be stable, it is going to be steady, and that is a huge change.”
Filby was speaking on the Global Captive Podcast alongside James Donald, partner and head of alternative risk solutions and analytics at Lockton, to discuss the value of structured solutions during volatile market cycles, the long-term mindset required and the work that goes into implementing these structures.
SRS can allow captive owners to address risks that may not yet be fully covered by the traditional market, while building experience around those risks over time.
“When we look long-term, we are also looking at losses on the horizon, emerging risks that maybe are not being addressed in the here and now,” Filby said.
“When we are thinking with a traditional mindset, we do not think that these longer-term or horizon events can be addressed.
“But with a structured solution, there is something now you can do, which is acknowledge the risk, whether that’s emerging risks, cyber risks, climate change, and start to use this programme where clients are building their own experience, their own loss fund, and start applying limits to these areas that they actually need it.”
Donald said the design of the programme is important, with structured solutions able to evolve alongside a business and potentially accommodate new risks over the course of the insurance period.
“I think where we have worked well together in the past is trying to think about building in how the company might change over that term of the insurance period,” he explained.
“This enables that client to be very comfortable that that programme is actually fit for purpose.”
Donald said that over time the relationship often develops into more of a partnership between the insurer and the insured.
“My experience has been that structured reinsurers have been very willing to bring other risks on board and expand the coverage and make the programme even more fit for purpose for any changes that might happen in the future,” he said.
Listen to the full episode of the Global Captive Podcast here, or any podcast platform. Just search for Global Captive Podcast.