Michelle Bradley and Enoch Starnes were recently featured in an article by Captive Insurance Times titled, "Pricing the Unpriceable". In it, they discuss how cyber, AI and other emerging exposures move into captives well before a credible loss history exists. Consequently, the actuarial groundwork has to be built almost from scratch. Read on to hear how they price and reserve for risks the market has barely begun to measure.

Emerging risks such as cyber and AI are creating new opportunities for captive owners, but they also present unique actuarial challenges due to limited historical data and evolving risk profiles. When traditional loss experience is unavailable, actuaries must look beyond historical claims and leverage alternative data sources, industry benchmarks, rate filings, and related exposures to develop informed assumptions. For volatile risks, modeling techniques such as loss simulations can help illustrate a range of potential outcomes, while clear communication of uncertainty ensures captive owners and boards understand the analysis behind key decisions.

As more complex risks move into captives, collaboration between actuaries, captive managers, and owners becomes increasingly important. Building a strong data collection process from the beginning allows captives to generate their own claims experience over time, improving future analyses and supporting strategic growth. By starting with thoughtful policy structures, transparent discussions, and a commitment to ongoing education, captive owners can confidently evaluate emerging risks while maintaining the financial stability and long-term effectiveness of their captive programs.

You can read the Captive Insurance Times issue here. Navigate to pages 36-40 to read the full "Pricing the Unpriceable" article.

We welcome discussion with any of our insurance colleagues who want a better understanding of these topics, and those wishing to contact us can do so at support@SIGMAactuary.com or by scheduling a call today with one of our consulting actuaries.

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