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Captives to the Rescue During Tough Commercial Insurance Market Conditions

By Jim Swanke

February 14, 2022

Jim Swanke
Jim Swanke

We are in the midst of a very difficult commercial insurance market as the perfect storm of pandemic, subsequent economic impact, and social inflation have lengthened its duration well beyond what was originally anticipated.  Recent conversations with underwriters in London, Bermuda, and New York suggest the tough market conditions will persist for at least another 6 – 12 months.  Availability of insurance will be constrained, premiums will increase and coverage terms will be cut back.

Similar to the last great difficult insurance market of the 1980s, all organizations, large and small, have turned to captives to insulate themselves from the turbulent insurance market conditions and better control their own destinies.  More than 6,000 captives operate on a worldwide basis–many of those increasing their captive retained risk, adding captive coverages such as cyber risk, and accessing the capacity of the reinsurance marketplace to better weather the crisis. Captives are widely accepted as a legitimate form of risk financing and a specialized industry of captive managers, actuaries, and consultants and auditors has emerged to serve their needs.  This specialized industry presents a career opportunity for Risk and Insurance graduates.

RMI 635: Captive Insurance is a course that examines how captive insurance works, types of captive structures, available onshore and offshore domiciles to choose from, and advantages and disadvantages of their use in various settings.  The instructor is Jim Swanke, CPCU, ALCM, ARM, who has more than 40 years of experience in risk consulting, concentrating on alternative risk financing including captives.  He has implemented or re-engineered hundreds of captives and serves as president for two Vermont captives.  RMI 635: Captive Insurance is offered in the spring semester.