Managing Cyber-Related Volatility with Captives

Given the deterioration in the cyber market, captives should be considered by organizations examining their cyber/E&O risk financing approach. At their core, captives can provide short-term relief from cost pressures by reducing premium outflow while bringing longer-term program sustainability by using profits accrued to help build a more self-sufficient risk financing dynamic.

The principal benefits of this approach are essentially replacing insurer capital when it becomes overly expensive with organizational capital and concentrating the risk transfer budget on the volatility that may be otherwise intolerable to the organization’s balance sheet.