Captive domiciles are seeing growing interest from organizations to write cyber liability business in captives amid increasingly tough market conditions, regulators say.

As cyber rates have increased, and terms and conditions have become more restrictive, corporate insurance buyers are looking for alternative ways to finance cyber risk.

Many cells and pure captives formed in 2021 in Washington, D.C., included cyber, said Sean O’Donnell, director of financial examination, risk finance bureau at the D.C. Department of Insurance, Securities and Banking.

While D.C. has not seen any cyber-only companies formed, some captives are providing excess cyber liability coverage, he said.

“One company couldn’t even get cyber. It was a big company that was self-insured up to $50 million, so they put all that in a captive,” Mr. O’Donnell said.

He was speaking during a session at Business Insurance’s World Captive Forum, which was held in Miami last week.

Vermont has formed captives for cyber-only business and for single parent type situations where cyber capacity in the marketplace is difficult, said Sandy Bigglestone, director of captive insurance at the Vermont Department of Financial Regulation.

Insurers are also forming captives to manage cyber risks and there is increased activity among agency-owned captives and MGAs/MGUs that specialize in cyber. “Insurers want them to have skin in the game,” Ms. Bigglestone said.

Cyber risk can be managed through a captive, said Debbie Walker, senior deputy commissioner at the North Carolina Department of Insurance.

The department considers these types of requests, especially if it’s cyber-only, in the same way it does other lines of business going into a captive, she said.

“We would want to see a clear business plan, what the risk is and how it’s going to be managed,” Ms. Walker said.

Regulators want to know how much exposure the captive is going to take on itself, whether it’s fronted, what layer of risk it is and if there is reinsurance, she said. “Is there capital for the exposures that are going to be taken on?” she said.

Daniel Towle, president of the Captive Insurance Companies Association, said many captive jurisdictions have seen unbelievable growth in recent years.

“2020 was a record year and… 2021 will probably be an even better year than that. We really are having the perfect storm with captive insurance,” said Mr. Towle, who moderated the panel.

Kencil McPhee, deputy manager, supervision for the Insurance Commission of the Bahamas, also participated in the panel.