Despite softening rates, the property insurance market continues to be challenging and a key driver of business into captives, a panel of risk managers said Wednesday.
“You hear that the property market is softening,” but it’s just evening out and rates remain high, said Joshua Bicknell, Richmond, Vermont-based vice president of captive insurance at Revantage, a Blackstone portfolio company.
He was speaking during a panel session at the 40th annual Vermont Captive Insurance Association conference.
Revantage, a multicell captive structure, was formed five years ago in response to tough property insurance market conditions, Mr. Bicknell said. It has since expanded into medical stop-loss, tenant liability and a master casualty program, he said.
“Property continues to be our biggest pain point, even though we’ve seen two years in a row of some rate reduction,” said John Hermeier, Minneapolis-based executive vice president of business development at food company Jack Link’s and president of Kippered Risk Solutions, its single-parent captive.
“It’s still the area that carriers, they just don’t like food companies right now and the nature of catastrophic events,” Mr. Hermeier said.
“It’s mostly fire, but wind as well if it does impact your facility, that facility will probably never get up and running again,” he said.
The company is heavily investing in risk and loss control by upgrading facilities with sprinklers and replacing insulated panels, Mr. Hermeier said.
“We’re spending a lot of time and effort in just looking at improving our loss position and hopefully becoming more attractive to our property carriers,” he said.
Property continues to be challenging because of limited contingent business interruption coverage, and captives are a strategic tool to add capacity, said Brando Soto, Boston-based senior director, insurance and risk management at Vertex Pharmaceuticals and president of its wholly owned captive, Torreyana Insurance.
“Every carrier is cutting back limit on contingent business interruption and so we see the captive taking a bigger part of that specific coverage,” he said.
Pharmaceutical companies face aggregation risk. “We tend to use the same suppliers and so the carriers are typically hesitant to give us as much limit as we really need,” he said.
“We’re getting a lot of pushback and it’s been a trend year over year for the last few years,” he said. Insurers are willing to provide fire and all other coverages, “but on contingent business interruption, (they) have some hesitations even with the safe profile, the resiliency of the supply chain, inventory and risk management,” he said.