Rising insurance premiums are costing businesses millions of dollars they can ill afford as they navigate the coronavirus pandemic. Many companies are responding by trying to manage risks on their own.
A surge in demand for so-called captive insurance and the increasing amount of capital being devoted to mitigating risks have caught many in the industry by surprise, including brokers who sell the idea of setting up a captive insurer.
A captive is owned and controlled by the business that establishes it, which could be a restaurant, drugmaker or retailer. It writes coverage for its owners and pays out claims when the business runs into unexpected trouble. Before the coronavirus had even appeared, some U.S. businesses had ensured their captives wrote policies covering a potential pandemic, allowing them to avoid disputes with mainstream insurers. Some mainstream insurers have largely refused to pay out business-interruption claims made by companies hurt by