Medical stop loss (MSL) captives are on course to account for more than 25% of the overall MSL insurance market in the United States over the next few years, according to Phillip Giles, managing director at MSL Captive Solutions.
“It’s not unreasonable to project group captives accounting for more than 25% of the total medical stop-loss market within the next few years,” he told Captive Intelligence.
He added that their research suggests group MSL captives currently represent more than $5bn of the overall $27bn MSL market, with significant growth expected to continue in this space.
The use of MSL captives has increased for a number of reasons, including the ability to optimise long-term rate stability for smaller self-insured employers.
Larger employers that have set up single-parent captives to help distance themselves from commercial market volatility in other lines are expanding their captive to include medical stop loss.
MSL is also an easy addition to a captive and, as a short-tail line of business, can serve as a substantial risk and financial hedge to augment the more traditional long-tail lines held in a captive.
“Adding MSL to the captive also helps the employer from a budgetary perspective,” said Giles.
“Rather than fund the self-insured plans through general assets, the employer can convert segments of retained risk into defined layers of medical stop loss and fund the coverage through regular premiums paid to the captive.”
He added: “This also helps facilitate the definition of and accumulation of surplus, which can be used to offset risk-related expenses further.”
Giles noted that MSL captives that employ sound risk selection (membership) guidelines and have a platform based on medical cost and risk reduction initiatives will continue to outperform the traditional stop-loss market and deliver the best results for their members.
MSL Captive Solutions, which was established in 2020, is one of the few captive service providers focusing specifically on medical stop loss insurance for captives.
“Our first eight months were spent evaluating underwriting platforms and working through the due-diligence process with our carrier partners,” Giles said.
The company added a chief operating officer, a chief financial officer, and a new chief underwriting officer, earlier this year, along with two more senior-level captive underwriters.
“I have known our CUO, Peter Parent, for more than 20 years,” Giles added.
“He is among the most knowledgeable technicians that I have ever worked with. He has been an extraordinary and impactful addition to our leadership. We have a deep and exceptional team of five expert MSL captive underwriters.”