Guest Perspective

By Kevin Cunningham Risk Financing, Part 2 of 3

Editor’ s Note: This is the second edition in a three-part series for Crane Hot Line, which showcases that the growth of captive insurance is projected to accelerate even further in 2025, driven by companies’ needs to better address increasingly difficult conditions with traditional insurance markets, in addition to growing risk management challenges to adapt to with constantly emerging risks for business owners according to Captive. com.

Furthermore, artificial intelligence( AI) is expected to play an increasingly transformative role in the captive landscape, enhancing data analysis, supporting strategic decision-making and improving operational safety according to risk management experts at IRMI.

Additionally, Steve Bauman, head of global programs and captive practice North America at AXA XL, shared his enthusiasm for the expanding role of captives, stating,“ For 2025 and beyond, the increasing maturity and strengthening of captive insurance companies opens increased opportunities for captives to play a bigger and broader role in risk management. I can’ t help but be excited about the partnerships that will be needed in corporate risk management to support the future growth of AI and autonomous mobility, and the future of captives is exciting, not only for large corporations but also for many smaller companies that can pursue the captive experience via group, agency or cell captives and embrace risk management resiliency.”

Captive Industry Leadership Outlook

According to the Captive Insurance Companies Association,( CICA) President: Dan Towle:“ The captive industry growth will remain strong through 2025, even with a softening insurance market in some lines of coverage. Companies utilizing captives are seeing the long-term benefits in both hard and soft markets and will not be leaving the market anytime soon. The expansion of existing captives and new captive formations will fuel significant premium volume growth, and this will be the year the United Kingdom decides whether it will become a direct participant in the captive insurance industry. If the [ United Kingdom ] becomes a captive insurance domicile, this could potentially mark a new era in captive development and perhaps be the most significant insurance / risk management news of 2025.”

Captives are used by the vast majority of Fortune 500 companies to finance their own risk. In fact, as referenced in the previous article, and noted by Captive. com,

there are approximately 7,000 captive insurance companies domiciled in more than 70 regulatory jurisdictions worldwide. These captive insurers are set up to insure the risks of its owners as an integral part of risk management programs to contain the total cost of risk. Specifically, a captive insurer is an insurance company that is wholly owned and controlled by its insured members; its primary purpose is to insure the risks of its members, and these insureds benefit from the captive insurers underwriting profit,

Insured

Captive

Surplus

Captive Management

Captive Manager

investment income, tax benefits and unbundled risk services( that they have a say in building).

When a crane owner finds himself in a hard( traditional) insurance market, the business is faced with a continued increase in premiums year over year, often resulting in larger retentions affecting the business’ s total cost of risk. This represents riding the traditional insurance market cycles as status quo, as opposed to taking control of your own destiny with alternative risk financing through your participation in evaluating captive insurance options with your trusted insurance broker / producers. There are many additional benefits with alternative risk financing( captive plans) from a financial and operational standpoint that warrant consideration as opposed to staying with the status quo year over year.

Strategic‘ Xs’ and‘ Os’

In your crane business, you set goals and have expectations for how things should run daily. With an alternative risk financing( captive) model, it is the same situation: you and your administration team set goals in forming and administering the captive insurance functions. These functions include certain fundamental operating elements including:

Attorneys

CPA

Actuary

Underwriters

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March 2025 • www. cranehotline. com