Industry Insights

Healthcare

Results from Aon’s 2021 Captive Benchmarking Survey show the amount of GWP underwritten by healthcare captives has risen by 73 percent since 2016 – a larger than average increase when compared with many other industries. We believe that this upward trend will grow as organizations increasingly recognize the value-add that captives bring to the healthcare sector, particularly in the U.S., where 93 percent of healthcare captive parent companies are located.1

Healthcare systems in the U.S. are growing – there are far fewer regional players nowadays – including, for example, hospitals, skilled nursing facilities and home healthcare facilities. Many healthcare systems face the challenge of rising retentions, and captives are stepping in to help these systems control certain costs, as well as their risk management.

Drivers of Demand

There are three main drivers for healthcare providers looking to captives for support. Cyber is the first. Cyber attacks on the healthcare industry are particularly significant due to the highly sensitive nature of patient data and the potentially life-threatening consequences of a system shutdown. Since 2016, we have seen a 161 percent increase in cyber GWP written by captives in this industry.2

Secondly, with the impact of COVID-19 and its variants, captives are adding value by devoting program funding for issues such as physician burnout, employee burnout and recovery programs.

Finally, supply chain issues have reduced access to certain supplies for many organizations. Captive structures can provide a cost-effective way of managing this risk as well.

Captives Offer Control

Insurance program control is also key for captive appetite among larger healthcare providers. Hospital systems are focused on continuous improvement as a general matter, and the attractiveness of receiving/issuing/offering grants within captive programs to reinvest money back into the system is crucial.

Bespoke solutions available to captives are often not offered in standard insurance programs. These solutions allow systems to buy supplies and equipment and help improve safety programs.

Captives are a natural fit for healthcare because of the flexibility and options offered – particularly with the grant programs – including releasing collateral, continuously improving systems and allowing providers to focus on their core business, knowing that robust risk mitigation is in place.