Data focused captives can be complementary buffer to plug emerging risk coverage gaps

Yesteryear’s hard insurance market cycle drove “noise” in the risk management community around the use of captive models as a way to keep a handle on escalating premium prices amid shrunken capacity in certain lines of business – however, today’s usage of these formats is more centred on plugging “unique” and sector specific coverage gaps that insurers perhaps do not understand or do not have data around that can support accurate pricing.

This was the consensus among industry experts participating in a panel discussion – entitled ‘Expert Arena – Captives and ART’ – at the Axco Global Insurance Summit on 16 April 2026.

A key advantage of captive arrangements, according to the session panellists, is data – and this benefit is multifaceted.

Firstly, the experts noted that organisations establishing captives to address very sector specific, niche risks – of which they have a detailed understanding – provides an ideal opportunity to collect data that the insurance sector can use in the future to price more accurately and ensure certain risks are more “palatable” than perhaps they have been in the past.

An insurer representative on the panel, for example, explained that carriers can take advantage of commercial clients’ greater analytical capabilities in order to inform premium pricing.

He said: “You can have new, emerging risks where the data is not there to really predict the modelling. To put a price on that [as] an insurance company, we are on the side of caution – but captives have been used to incubate those risks, which is really good tool.

“So, you can have someone front [the] risk, if it’s a reinsurance captive, [and] get some years of data with management information (MI) to drive more predictability in prices. And then [bringing] the insurance markets into play, there is meaningful data that you can [use to] assess the price.”

The insurer speakers on the panel agreed that corporate clients were “on the hook” when using a captive, with skin in the risk management game. They thought this was positive because these firms are therefore very focused on risk management and data generation, which “focuses the mind” and makes them more attractive for insurers.

A risk professional on the panel, meanwhile, confirmed that captives are ideal for collecting data on certain risks to help inform the insurance market. However, she also noted that being able to manage niche risks in this way can additionally support business growth.

“The market loves data and, oftentimes, the data just isn’t there for traditional insurance to get comfortable with writing those risks,” she told attendees. “That’s where the captive really comes to the fore and has been a central component for [my] business because it’s enabled us to grow, evolve [and] manage those risks that are quite unique.”

However, the risk expert added that insurance cycles are an important consideration too. She advised organisations to not retain risk for the sake of it, especially when softer market conditions enable greater competition and capacity between insurers – meaning businesses can get more bang for their buck and redeploy leftover capital in other areas.

Case studies: What risks should captives retain?

Among the panellists were representatives from organisations that had already actioned captives, or were currently exploring captive opportunities.

One speaker’s organisation had implemented a large and complex network of captive arrangements that covers around 40 lines of business – the global firm is even running its employee benefits programme through a captive scheme.

Underpinning this approach, the risk professional explained, is a team of actuaries that model the company’s portfolio of risk to help determine which risks should be retained and which should be transferred to the insurance market.

The speaker explained: “We’ve set our risk appetite around the one in 200-year events. Anything above that, we will typically look to transfer. Anything below that, we will retain within the organisation. That’s a really good benchmark for us in terms of what belongs in a captive and what doesn’t.”

The risk professional agreed with the overarching panel consensus that “hard to insure emerging risks” should be retained in a captive, to “incubate them [and] give [insurers] that data that ultimately will make [them] comfortable with writing the risk in the future”.

She added that other risk types worth retaining include “predictable, high frequency type losses, or [where] there’s that really stable loss pattern, so you can predict what that risk is going to be for the captive. That makes sense to keep within the organisation”.

Meanwhile, she believes “catastrophic risk” or risks that drive “volatility” should still be transferred to the insurance market “because you don’t want something that is potentially going to destabilise the capital within the captive itself”.

The speaker explained: “It’s a long-term vehicle, so you need to take that longer-term view when thinking about those risks.”

On the other hand, a risk manager on the panel – working in a different industry sector to the aforementioned risk professional – was only just starting on her firm’s captive exploration.

For her, the primary driver of investigating a captive arrangement was the availability of cyber insurance – this is the key risk that she is focused on securing via a captive. Secondary drivers to her organisation seeking a captive include the cost of liability programmes and current market conditions.

As a starting point, her business has conducted a global study on captives to better understand the potential pros and cons of the model – however, her personal view was that captives could be a useful risk management tool.

An insurer speaker added that examples of emerging risks that organisations could retain within a captive include non-damage business interruption (BI) and cyber – which historically can be an expensive risk to transfer.