Can a captive insure a risk the standard market will not cover?
That is what a captive is for
Queen treats this as the definition rather than an edge case. A captive is designed to insure risks the conventional market treats as uninsurable, and the purpose of a captive programme is to fill gaps in the marketplace. Nobody, in his framing, goes to a captive unless they have a problem.
The answer is short because he does not think the question is difficult. Underwriting is a matter of pricing and structuring the exposure, so the constraint is rarely whether a risk can be covered. It is whether anyone in the traditional market wants to.
That reframes what a coverage gap means. If a line is being withdrawn or priced out of reach, the exposure has not changed; the appetite for it has, and that is a problem a captive is built to solve.
Key takeaways
Queen treats filling gaps as the purpose of a captive rather than an unusual use of one.
He separates two causes of a coverage gap: a genuinely difficult account, and a market that has misjudged the risk.
A misperceived risk is the strongest case, because the business is being priced on losses that are not its own.
Queen narrows it to two causes. Either the account is genuinely difficult, which is the case an owner already understands, or the market has misperceived the risk, which he says happens all the time. The second is the more interesting one, because a business whose experience is better than the market assumes is being priced on someone else's losses.
From the conversation
Matt Queen
Captive Insurance Attorney and MGA Executive, Author of Modern Captive Insurance
“Again, ignoring the handful of bad actors out there, you're exactly right that the purpose of a captive program is to fill gaps in the marketplace.”
Transcript
Read the full transcript 3 turns
HostIt's not a skinnier policy than what you can buy in the open market. How do you feel about that, Matt? I can
Matt Queenunderwrite a hand sandwich. So you can ensure absolutely anything out there. A captive is designed to ensure uninsurable risks. You wouldn't go to captives unless you had a problem. Again, ignoring the handful of bad actors out there, you're exactly right that the purpose of a captive program is to fill gaps in the marketplace. And when those gaps arise, they can typically arise just for really two reasons. One, problem child, what you're talking about
Matt Queen, or a misperception of risk, which happens all the time, by the way. So those two general areas over captives are going to -- So
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