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Captive insurer owners are increasingly using their captives to cover cyber and medical stop-loss risks.
While these risks may not have previously been insured in captives, changing risk profiles are encouraging owners to utilize their captives to cover them, Peter Johnson, property/casualty actuary for Boston-based Spring Consulting Group L.L.C., said in a webinar on Wednesday.
“Cyber liability over the last five years has really been on the up rise,” he said. “You see news all the time on cyber breaches and this risk has been taken on by captives, many small captives and large captives. Medical stop loss has been on the up rise over the last five years as well. These are risks that are becoming very familiar with regulators, which is a great thing. They see these coming through the captives all the time.”
One option for captive owners is to put medical stop loss risk in their pure captives, said Steven Keshner, Spring Consulting partner and chief actuary. “Another practice that is becoming more and more prevalent is to get involved in a group captive program, perhaps through a cell captive structure, and share risks with other like-minded employers as well,” he said.
Use of the captives to cover medical stop loss risks has increased since the Affordable Care Act took effect, Mr. Keshner said. Previously, lifetime benefits may have been capped at $1 million or $2 million, but the legislation prohibited those limitations.
“Now the unlimited risk has more employers thinking about reinsurance protection that might be needed there,” he said.
After some initial reluctance, owners of captive insurers appear to be showing some enthusiasm for using captives to cover cyber risks, industry analysts say.