It may be a good time to buy insurance in the commercial market, but the role for captives continues to expand and carriers such as Zurich embrace the partnership and value a captive can provide.

Speaking on the latest episode of the Global Captive Podcast Esme Gould, head of captives & ART, and Nick Pritchard, senior cyber liability underwriter, both at Zurich Insurance Company UK, discussed the cyber market landscape and where captives are participating.

Pritchard said there has “never been a better time to buy cyber insurance”, and while he expects the buyer-friendly environment to continue, there are challenges on the horizon that could challenge the cyber market in the longer term.

“There is a fantastic choice for buyers at the moment,” he said. “The levels of capacity in the market are unprecedented in terms of the short history of the cyber insurance market.”

Continued innovation concerning products, policy wordings and risk management services has brought “new levels of creativity”, while the maturing market is also helping cyber policies to become better understood and trusted.

“In terms of those claim solutions, they are now far more tried and tested than they’ve ever been, whether that’s for an in-house solution, an outsource solution or some form of hybrid of that,” he added.

“Some of the outsource vendors in the ecosystem have dealt with thousands of incidents now, and so there’s never been a better time to get a kind of assurance around the quality of the service that you’re going to be able to get in the event of that worst case scenario.”

Pritchard did caution, however, that the increasing prevalence of ransomware and ransom demand events, rising number of threat actors, and the rising volume of cyber-related class action suits in the United States could create a “perfect storm” of different types of losses all coming together.

“We’ve seen two or three years of significant rate reductions; that can’t go on forever,” he said. “It is a great time to buy right now. That’s set to continue, but there are, I guess, things on the horizon that might challenge that in the long term.”

Concerning the role for captives in corporate programmes, Gould said the market conditions have not really impacted appetite from owners to exploring their options.

 ”If we go back a couple of years, we saw a lot of insureds exploring the option of adding cyber into their captive,” she said.

“In the current environment, you might expect this to have changed, but a captive is a long-term solution, which is designed to navigate all stages of the cycle. Plus, many insureds have a captive first model as well.

“We are still seeing traction in the captive cyber area.”

Pritchard said that while there was a “real acceleration” in captives writing cyber insurance two to three years ago, he is still seeing new buyers deploy their captive today, with one common motivation being to stem volatility in market cycles.

In addition, using a captive can be an effective way to build and boost capacity.

“One of the really effective ways of building adequate limit is to actually utilise a large captive placement lower down the programme,” Pritchard explained.

“We’ve seen customers do that time and time again, in order to kickstart that programme to get up to the high limits and access capacity from all areas of the market.

“So there is certainly still a relevance around captives even during a softer spell in the cyber insurance market.”

Listen to the full captive cyber discussion on the latest episode of the Global Captive Podcast here, or on any podcast platform. Just search for ‘Global Captive Podcast’.