Hard insurance markets are characterised by high demand for insurance and a reduced supply. During hard markets, insurers often impose strict underwriting standards and issue a limited number of policies while the cost of premiums continue to rise. We are already seeing restriction in capacity, increased retentions, leading to premium rates going up on all insurance lines. 

This presents the perfect opportunity for High Net Worth and Private Family Offices to consider establishing their own captive insurer. Hardening markets become drivers for alternative risk transfer options, which, of course, captives are at the heart of. The ideal is a long-term focus, and it should be tied to long-term risk financing strategies that are ideally aligned with an overall risk strategy. Perhaps the reverse way to think about this matter?

A company considering establishing a captive to address a hard market must view the move as a marathon rather than a sprint, they are not a short-term fix. There has to be a commitment to build the captive and not consider it an option for a couple of years.