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Case study

Health care firm cyber risk modeling leads to expanded captive use

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The Challenge

 A leading health care firm had a commercial cyber policy with a US$1 million deductible. The firm had concerns about the impact of a large cyber claim on its individual subsidiaries, some of which would be materially impaired by a full-limit hit should a breach occur under its existing commercial coverage/retention arrangement. Our Marsh Captive Solutions and Marsh Risk Analytics practices were engaged to review the client’s cyber/ privacy liability program and assess the potential of its existing captive in closing any gaps.

The Solution

 Using several options provided by the client, the Marsh Captive Solutions actuarial team worked with Marsh Risk Analytics in conducting cyber analytics modeling work. This study included a layer value analysis for alternative cyber/privacy liability program retentions within the captive and demonstrated the value of the client taking alternative limits of US$950,000 excess US$50,000, US$900,000 excess US$100,000, or US$1.9 million excess US$100,000 through its existing captive. The client was then able to use the modeling work to explore whether its mature captive could be used to support its cyber program.

The Results

 Using the captive as a deductible reimbursement vehicle, the client selected the existing retention of US$1 million and opted to use its captive to take the layer US$900,000 excess of a US$100,000 deductible to the affected business unit. The cyber study demonstrated that the client could use its existing captive to mitigate the impact of a cyber breach on any one subsidiary or business unit. The client was able to select the layering scenario that was most efficient in tandem with its excess insurance options in the commercial market. Further, the Marsh study enabled the client to select the optimal retention given the renewal premium quotes from its insurer, as well as gain valuable quantitative input regarding the appropriate initial captive premium.

A Modern Approach to Risk Management

By providing clients with a new forward look at risk, Marsh enables clients to quantify and manage risk through a notable combination of data, analytics, and technology. Our risk analytics insights empower companies to take a holistic view of risk to confidently move forward with strategic plans in today’s modern risk environment.

Our risk analytics allow clients to have a real-time, customized, dynamic conversation about risk-financing options. We utilize a multi-step process to give clients:

A forward look

Now, risk planning can leverage Marsh’s deep pool of claims, exposure, and placement data across industry, companies of differing size, geographies, and products to deliver a clear, informed view of future loss potential and volatility.

A customized financial view

We combine loss modeling with an analysis of key income statement and balance sheet drivers to enable clients to assess risk tolerance with respect to their unique capital position.

Optimal decisions

We deliver a transparent view into a company’s economic cost of risk (ECOR) helping clients determine optimal risk–financing structures or risk–mitigation investments.

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