Key Drivers of the Increased Use of Captives with Reinsurance

The following industry trends have contributed to an increase in captive health plans with appropriate reinsurance:

• A growing number of healthcare entrants (e.g., providers, property and casualty insurance carriers, and venture capital investors)
• New health programs requiring protection in early years (e.g., Next Generation ACOs) and unlimited maximum risk
• An abundance of low-cost capital has made reinsurance a cost-effective option for capital planning and management and catastrophic risk protection.

This growth in the use of captives also has been fueled by the following objectives of providers:

• A desire to better understand fundamental risks and exposures
• A desire to integrate various reinsurance programs for cost, capital and risk management efficiencies
• A desire for analytics to provide customers with insights and confidence to vary reinsurance buying patterns to mitigate and diversify risk.
• A desire to allocate retentions across multiple subsidiaries
• A desire to draft custom insurance policy or reinsurance treaty terms and conditions
• A desire to access strategic partners to help manage risks

Source:  Rob Fast, Willis Towers Watson, presentation on healthcare captives, Managed Care Organization (MCO) conference, Chicago, September 2017. Used with permission.

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