Following the release of Aon’s Using a Captive Insurance Company to Drive Positive ESG Outcomes, the Professional Services Practice shares further insights on how captive insurance companies can help support the sustainability strategies of their professional service firm parents.

A captive insurance company is established to help manage the risks of its owner(s) by providing customizable insurance solutions. As a key player in its parent’s risk strategy, a captive can be used to address risks related to sustainability issues by integrating environmental, social and governance (ESG) considerations into its operations.

Professional service firms are acting on climate change, investing in their people in many ways, including through diversity, equity and inclusion (DE&I) initiatives, and remain committed to principles for good governance. By applying the Principles for Sustainable Insurance (PSI), a captive can raise awareness, manage risk and support the sustainability objectives of their professional service firm parent:

• Underwriting: By writing sustainability-related programs, captives can be used to integrate ESG considerations into the parent’s insurance strategy. For instance, captives are increasingly used in employee benefit financing, offering solutions with increased flexibility and improved governance. The use of captives for employee benefits may allow owners to offer customized programs that support social (the ‘S’ in ESG) goals, such as DE&I or wellbeing. Programs can address areas not consistently covered by other insurers, including mental health, LGBTQ+ benefits, women’s health and preventive health.
• Investment portfolio: Captives can support their parents’ sustainability strategies through their investment activities. Certain investment options (such as “green bonds” and “green funds”) are available that align with these goals and promote the firms’ values, while also respecting independence requirements and the financial strategy of the captive.
• Risk bursaries: Captive disbursements to the parent in support of a risk management initiative, known as “risk bursaries,” could in theory be used to support sustainability initiatives and improve underwriting results. Initiatives that support investments in people (health and wellbeing, DE&I, continuous learning), cyber security risk and impact assessments and environmental sustainability may offer tangible use cases for the captives of professional services firms.

The role of a captive evolves over time and adapts to changing risk issues. With growing concern around sustainability issues, leveraging a captive to support firm goals can lead to successful outcomes.

Contact

The Professional Services Practice at Aon values your feedback. If you have any comments or questions, please contact Audrey Jenner or Henry Lim .



Audrey Jenner
Vice President and Director
Montreal






Henry Lim
Senior Vice President and Executive Director
Montreal