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While captive insurers have been accustomed to underwriting workers compensation, liability lines and some property risks, Aon P.L.C. said it has seen growing enthusiasm for underwriting cyber risk.
In the 2016 study “Cyber, the Fast Moving Target,” Aon said that by covering cyber risks with a captive rather than self-insuring the risk, “the company gets the opportunity to see how the risk will behave in a formal insurance structure subject to underwriting and claims adjustment disciplines.”
“Over time,” the report said, “that experience and data can be used to negotiate program structure with insurance carriers and inform cost allocations of cyber loss.”
A 2016 Marsh L.L.C. study, “Captive Solutions: Creating Security in an Uncertain World,” found that cyber liability is one of the most well-known emerging risks that is constantly evolving and having an effect on most modern organizations.
From 2014 to 2015, the study said, the number of Marsh-managed captives using cyber liability programs increased by 30%. Over the past four years, cyber liability programs in Marsh captives, both new and existing, have grown by 160%.
“There is a need for innovative solutions to create security against emerging cyber risks, and captives are meeting this need for many of our clients,” the report said.
Cyber liability, political risk and medical stop-loss have experienced less explosive growth at 30%, 27% and 14% respectively. However, Marsh said, all three coverages experienced consistent and significant growth over the past four years, a trend that is expected to continue.
After some initial reluctance, owners of captive insurers appear to be showing some enthusiasm for using captives to cover cyber risks, industry analysts say.