The recent spate of natural disasters has focused a spotlight on catastrophic losses and how captive insurance can play an "important role" in helping organisations “defray” some of the related financial losses, according to JLT’s Insurance Management’s (JLTIM), Anne Marie Towle.
Towle, executive vice president and consulting practice leader at JLTIM, explained companies using their captives to insure a portion of quake and wind losses in California and wind and flood losses in coastal regions are becoming more common.
She commented: “I’ve seen some companies with high-wind deductibles of up to 10 percent and others that have to pay $1 million to 5 million out of pocket before commercial insurance kicks in. Captive insurance is often an appropriate way for large organisations to fund these first-dollar losses.”
Towle suggested companies could buy catastrophic reinsurance for excess losses. She added: “Cat losses give companies an opportunity to use a captive to its fullest potential, providing them balance sheet stability. A captive-centric strategy for cat losses eases the immediate impact to operations and provides the ability to smooth potential losses over time.”