White Paper

4 Key Qualities to Look for in Your Captive Fronting Provider

Captive formations are growing as many insureds look for alternative ways to mitigate their challenging risks. Having a captive fronting provider that understands those risks and their needs is essential.

White Paper Summary

Towards the tail end of 2019 the captive industry was already seeing growth amid a reduction in capacity and a hardening traditional insurance market. As we have continued through 2020 these market conditions have continued with captive structures thriving in the current economic environment.

“As the market has increasingly hardened, and as capacity has become more and more restricted, insureds are seeking out alternative risk solutions, leading many to the captive fronting space,” explained Mike Lister, Head of Complex Multinational in Canada for AIG.

In Canada specifically, captive feasibility studies have grown by 50% this year as compared to 2019. Likewise, Marsh Captive Management reports that it has seen a record 76 new captive insurance companies formed between January and July of this year, representing a 200% increase when compared to the same period in 2019.

Lister said this drive toward captive use is being accelerated by current events and market conditions. The current climate of economic uncertainty has brought many risks to the fore with the hospitality and transportation industries being particularly impacted, driving the shift towards alternative risk solutions.

“Coverage including property, energy, event cancellation, trade credit and certain financial lines are being heavily impacted by the current situation,” Lister explained. “Captive utilization is growing as a positive solution to help insureds address and mitigate their challenging risks.”

“There’s a lot of opportunity and a lot of capability within the captive space that can help insurers and insureds find optimal risk solutions,” he said. “That success and optimization starts with examining who you partner with. You need a fronting provider that understands not only captive solutions, but also the specific needs of your business.”

For those interested in captive solutions, here are some of the distinguishing qualities to look for in a fronting provider, and how those same qualities can enable captive partners to successfully navigate an ever-changing risk environment.

To learn more about AIG, please visit their website.

AIG is a leading international insurance organization serving customers in more than 80 countries and jurisdictions.

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