Belen Navarro and Ross Connell of AIG recently discussed the way captives might be used in the cyber risk insurance market.
Navarro and Connell discuss how a captive could be used when there is no coverage available for a particular cyber risk or it is extremely expensive, which could become the case in retail or health sector in the future. As the two note, the captive would be used to “build a statistical base, which can make securing excess coverage at acceptable terms and pricing easier.” Furthermore, the captive could provide coverage where there currently are limited products such as “future lost revenue or first-party loss of inventory due to technology failure.” On top of these benefits, the captive would be more flexible and provide a better risk transfer structure.
Captive Insurance Times has the whole story behind Navarro and Connell’s captives strategy for cyber risk.