Forming a captive may address the lack of pandemic risk solutions

The COVID-19 pandemic has challenged business interruption insurance and transformed how the industry looks at workers’ compensation coverage. Cyber liability has taken on new levels of exposure as people work from home, school is held online, and retail converts to no-touch operations.

Companies are realizing what their current insurance does and does not cover throughout these uncharted times. Many have recognized a gap in insurance coverage they should have filled. At present, mainstream insurance companies don’t provide coverage to meet the specific demands of pandemic risk. Even if these unique coverages do exist, some companies find certain types of losses could be handled internally within one’s own captive for less money than the commercial insurance market.

Companies may want to consider captive formation to address the combination of unavailable coverage and future uncertainty related to pandemic insurance. In this article, Milliman’s Rachel Seale and Billy Onion explore what companies need to think about before forming a captive and whether or not it makes sense financially.