Property insurance is getting cheaper. Why are some buyers retaining more risk?

Commercial property buyers have more capacity and better pricing to choose from as they look toward 2027. But cheaper insurance has not eliminated every company’s appetite to retain a share of its own risk, according to FM chief underwriting officer Laurel Rudnick (pictured).

Businesses that have invested heavily in strengthening their facilities may be confident enough in their resilience to participate in losses, Rudnick said. The question for brokers is whether an alternative arrangement like a captive cell or a parametric solution serves that client’s needs over the long term, even when traditional coverage is readily available.

“We certainly have clients who are interested in those primary layers and having a participation in that, but not necessarily through a straight deductible or a straight retention,” Rudnick told Insurance Business.

A structured solution could also allow a client to participate in a primary layer of risk while placing bounds on its exposure, she added.

Captives hold appeal as property prices ease

Captive use remains strong despite easing commercial property prices, according to WTW’s spring 2026 market update. The brokerage pointed to continued catastrophe and secondary-peril losses, as well as pressure in casualty and other liability lines, as factors supporting captive utilization.

Read more: Behind the new strategic era of captive insurance

In Vermont, the largest US captive domicile, regulators licensed 51 new captive insurers in 2025, up from 41 in 2024. The state ended 2025 with 707 licensed captives, including 30 dormant companies, compared with 683 a year earlier. Those figures exclude individual captive cells.

But why should a company retain more risk when property insurance is getting cheaper?  For one, alternative arrangements are meant to be considered over a longer horizon than a single renewal and are designed to complement a traditional insurance program.

“Many of them are actually on a multi-year basis,” noted Rudnick, “they’re not spot solution for a short-term need.”

Read more: Why surplus capacity is strengthening captive strategies, not sidelining them

What should brokers bring to the discussion?

FM has recently expanded its alternative risk transfer offerings, adding parametric insurance, structured risk financing and captive cell arrangements alongside its existing property coverage.

For brokers weighing an alternative program, Rudnick said the discussion should start with what the client is trying to solve and how much risk it is willing to retain. From there, several considerations can help shape the choice:

• The client’s objective: Is the business looking to participate in losses it feels equipped to manage, address a specific exposure or complement its traditional coverage? Rudnick said the answer should guide the choice of structure.
• Its appetite and capacity for retained risk: A client may be comfortable taking on more exposure, but only up to a point. Brokers should discuss how much volatility the business is willing and financially able to absorb.
• The strength of its risk improvements: Investments in facilities and loss prevention may support a client’s confidence in retaining risk. Rudnick cautioned that a few quiet years alone do not provide a complete picture of its exposure.
• How the arrangement fits the existing program: Captive cells, structured solutions and parametric policies serve different purposes. Brokers should assess how an option would interact with traditional coverage, including deductibles, limits and exclusions.
• The trigger and potential payout: For parametric coverage, brokers should examine whether the event trigger reflects the client’s exposure. A qualifying event may produce a payment that differs from the actual loss, while a loss could occur without the trigger being met.
• The longer-term commitment: Some alternative arrangements operate over multiple years. Brokers should consider whether the structure would continue to serve the client if traditional property pricing or capacity changes.

Recent catastrophe experience may also shape the conversation differently for each client. Rudnick pointed to severe convective storms and hail as risks that could generate interest in parametric solutions, which are designed around specified event triggers.

A coastal business that has invested in wind protection, meanwhile, might be interested in retaining more risk after a period of relatively light activity. But Rudnick cautioned against relying on a few years of loss experience alone when assessing that decision.

“What we can bring to the table in that instance is a true view of the exposure,” Rudnick said, “not relying just on a few years of loss experience, but how hardened are those facilities if a future event is to occur, and is that something that they’re willing to participate in?”