AM Best: use of single-parent captives growing

Insurance rating agency AM Best said a majority captives it rates write cyber coverage directly or the parent organization has some level of coverage either through self-insurance outside the captive or in the commercial market.

“Within the universe of AM Best-rated captives, a number [of captives] have been seriously considering writing cyber risk,”according to a Best’s Briefing.

Addressing the perception that captives “are places where the owners ‘dump’ difficult risks,” AM Best said it is “readily apparent” this is not true.

“Rated single-parent captives are reluctant to underwrite coverage that they are not familiar with, or where they do not have enough expertise,” said AM Best. Therefore, these captives put a lot of thought into policy structure and understanding all the aspects of risk within the parent’s business. They are subject to scrutiny from the corporation, internal risk managers, regulators and rating agencies.

AM Best rates single-parent captive insurers in the financial services, oil and support businesses, retail, energy, pharmaceutical and manufacturing industries–some of the most targeted industries for a cyber attack.

While these captives cannot alleviate all cyber risk of its parent, AM Best said insurance markets should take note. The agency said they “can learn a great deal by joining with these captives to offer policies that provide adequate protection.

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