The captive insurance industry is evolving rapidly and is on track to reach a projected $250 billion global market value by 2028, according to Risk Management Magazine. The current insurance market — one of the most challenging in decades — presents an opportunity for companies to explore captive insurance arrangements.
In this blog, we want to walk you through the state of the captive market, its high level pain points and how Accelerant can support Members looking to deepen engagement and utilize captive structures to grow their business and expand their distribution opportunities.
The State of the Captive Industry
We are in a golden age of captive insurance with many looking to seize their opportunity in this market. But despite healthy headwinds, there are barriers to adoption. Here are some of the high-level pain points we see.
First, limited diversity in carrier selection. Today, the market is dominated by traditional carriers. They bring paper and capacity to the table but there is room for new players and differentiated approaches. These carriers rarely bring value added services beyond fronting paper and reinsurance. Theyimplement a delegated authority model so every deal is underwritten with extreme scrutiny rather than allowing underwriting specialists such as MGAs to utilize a program like approach.
Another major pain point is the length of time and complexity to set up a captive. The formation can, in many cases, take 12-18 months. Some factors behind this prolonged timeline are: regulatory due diligence, the number of third party vendors required to create the captive (captive managers, actuaries, accountants, and lawyers), examination and auditing. All of these elements can add complexity and drive up the time and cost of going to market.
As a result captives, despite experiencing healthy momentum right now, could appeal to an even broader audience if speed, efficiency, and cost were improved. Accelerant is leaning into addressing these pain points and has begun replatforming captives in the same way it is replatforming the overall insurance value chain.
The Accelerant Advantage
Our approach is focused on opportunity creation for all parties interested in risk-taking. We are combining the risk exchange, our value-added services, and a re-imagined captive approach to create an offering for Members, distribution partners and insured, through multiple structures:
- Single Insured (Single-Parent)
- Group (Member-Owned)
- Third Party (MGA/Agency Owned)
- Hybrids (Combination Ownership)
We are focused on delivering:
Speed to market. Members’ need for speed is being addressed by eliminating the chore of incorporation and removing additional domicile due diligence. We are also introducing an instant launch functionality, which further enhances speed to market.
Better Economics. At Accelerant we like to keep things simple. Our captives’ partnership is no different. We have a consolidated service provider model and we don’t ask for financial audits, examination or legal fees. On top of that we leverage economies of scale on spec, agg and LPT costs via our own capabilities and also profit share on spec and agg.
Delegated Authority. We understand that some program administrators want more control of their captive programs. They are looking to craft proprietary underwriting guidelines, forms and rates with their own rate, quote and issue capabilities. We make this happen.
More to Come
While captives as a concept are not new to the insurance world, new opportunities are presenting themselves. Don’t overlook them. There are fresh approaches on the table ready to be explored. Accelerant is here to help you explore approaches that allow you to expand your total addressable market and provide exciting opportunities to your distribution partners.
Do you have an interest in captives? Discover what Accelerant can offer by connecting with Joshua Kalmikoff, [email protected].