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Captive owners urged to take disciplined approach to adding risks - Business Insurance Skip to content Register for free Search Search Log In Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Captive owners urged to take disciplined approach to adding risks by Gavin Souter From left: Aaron Hillebrand, Pinnacle Actuarial Resources, Bill Mourelatos, GPW and Associates, and Brenton Liba, Mastercard. Alternative Risk Transfer/Captives Aug 12, 2026 BURLINGTON, Vermont – Captive owners considering adding new programs should use a structured process that examines the problem they are trying to solve, the financial implications and how the program would operate before committing capital, experts said. The analysis should also determine whether a proposed program meets insurance requirements and whether the captive has a viable exit strategy if the program does not perform as expected, they said Wednesday during a session at the Vermont Captive Insurance Association’s annual conference. The process should begin by clearly defining the problem and exposure, with input from company executives, actuaries, captive managers and other advisers, said Brenton Liba, director of risk management insurance at Mastercard in New York. Captive owners should then consider the program’s significance for the captive and the parent company, including whether additional capital would be required and whether additional protection would be needed, he said. They should also determine whether the arrangement provides genuine risk transfer and assess its potential return, cash flow and effect on the captive’s financial position before reaching a decision. “The worst thing you can do is bring your product into your captive and then spend the following year trying to figure out how you make it operational,” Mr. Liba said. Tenant legal liability can be an attractive captive program for real estate companies with large residential portfolios, said Bill Mourelatos, senior vice president at Phoenix-based captive manager GPW and Associates. The coverage typically has relatively low loss ratios and frequent, relatively small claims that can be readily modeled, he said. It can also provide third-party risk, helping diversify a captive. Scale is important; however, about 500 residential units generally represent a potential entry point, Mr. Mourelatos said. Selecting experienced third-party administrators, fronting insurers, and program managers is also critical because problems in program administration can erase expected underwriting profits. Extended warranties and service contracts are another potential captive opportunity because they tend to have substantial historical data, enabling owners to build relatively stable financial and loss models, Mr. Liba said. But the programs can create different risks. Warranty contracts, for example, can run five or 10 years, making it important to align premium recognition with the timing of expected losses, said Aaron Hillebrand, principal at Pinnacle Actuarial Resources. Long-duration contracts can also expose captives to inflation and interest-rate risk, making scenario-based financial testing particularly important. Captive owners should also consider from the outset how they would unwind any new program if it fails, Mr. Liba said. “How are we going to exit these lines of business if the worst-case scenario does come true?” he said. A poorly planned exit can create additional collateral requirements or other financial consequences for the parent company. 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