The captive formed by US-based cyber insurer Coalition has provided it increased flexibility and Shawn Ram, its head of insurance, told Captive Intelligence there were various reasons other managing general agents (MGA) may want to explore a similar strategy.
Coalition describes itself as the “world’s first Active Insurance provider designed to prevent digital risk before it strikes” and uses data-driven technology to provide coverage to more than 60,000 policyholders.
It announced on 14 February an expansion of its cyber insurance offering in the United States to enterprise businesses with revenues of up to $5 billion.
It also offers insurance in the UK and Canada and has relationships with global insurers, including Allianz, Lloyd’s of London, Swiss Re Corporate Solutions and Vantage.
Coalition established Palekana Insurance, Inc in Hawaii in December 2021 and Ram said it had been a valuable asset ever since.
“There are multiple reasons why captives provide value for MGAs,” he explained.
“A captive increases flexibility, as most MGAs have some degree of being beholden to carriers in respects to things like coverage limits at risk, appetite, etc. There’s also an element of control that a captive gives you.”
At the launch of Palekana, Coalition said the captive would enhance its ability to manage capacity and its long-term growth objectives while further aligning incentives with its customers.
Ram stressed that the company had not been forced into usiing captive, noting that the company had successfully secured capacity across all its programmes.
“We’re not required to use the captive, and we use the captive at our own discretion, our own risk appetite, and our own desire,” he said.
However, he did explain why a captive would be useful for those MGAs that are struggling to get capacity for certain risks.
“Capacity may be scarce in some of these areas, and so people may look captives to insure against some of these more challenging or innovative type coverages and opportunities,” he said.
Coalition chose to domicile its captive in Hawaii, and Ram highlighted that there’s a variety of issues that the company considered when picking where to domicile the captive.
“We considered things like the financials, tax implications, requirements of the domicile,” he said.
“There are nuances between onshore in the US versus offshore, and compared to an entity in Ireland, Bermuda or Cayman, and at the end of the day, Hawaii was the best fit.”