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Captives fills the gap in the insurance market for climate protection, ESG exposures



Captive insurers have a growing role to play in financing climate-related risks and environmental, social and governance initiatives, experts say.

There has been an increase in activity in the area, whether it is a captivity that takes part in an environmental policy, such as a warehouse or a deductible, or that companies in a certain industry form prisoners, says Ellen Charnley, CEO of Marsh Captive Solutions in Las Vegas.

Companies are also exploring how a captive can help them better manage risk and offer an alternative to the commercial market, Charnley said. “This is the beginning of a trend that we are likely to see more of,” she said.

Commercial market conditions for climate risk and property specifically have been challenging, says Anne Marie Towle, Carmel, Indiana-based global captive solutions manager at Hylant Group Inc.

Captive owners with a mature captive who have a surplus use them to access parametric coverage, for example, Towle said. New prisoners are also being formed who have a key interest in the climate and who are starting to finance part of this risk, she said.

Captives may also play a role in supporting low-carbon technologies, such as self-driving or electric vehicles, of which the commercial market has limited experience, Towle said.

Although many insurance companies are moving away from coal or reducing capacity for polluting industries, many suppliers want to support companies and accelerate their transition away from coal-intensive industries, says Liz Henderson, co-head of America̵

7;s catastrophe risk analytics for Aon PLC in Chicago.

Key ratio-based insurance and parametric coverage are examples of recently implemented risk transfer innovation, Henderson said. “All of these things are on the table, and we explore them regularly with our customers,” she said.


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