Captives are no longer simple risk retention vehicles. For sophisticated corporates, they are strategic financial tools designed to optimize capital, stabilize earnings, and retain underwriting flexibility.
Yet one persistent weakness remains: exposure to risks that traditional insurance does not adequately address, particularly Non-Damage Business Interruption (NDBI) and climate-driven volatility.
Parametric insurance is increasingly being deployed as a precision layer within captive structures to close that gap.
Descartes designs and structures parametric programs that integrate seamlessly into captive frameworks, combining advanced climate analytics with fronting and reinsurance capabilities.
Captive Protection: Closing the NDBI Gap
The Challenge
A corporate client sought flood coverage.
Their traditional Property Damage & Business Interruption (PDBI) insurer excluded Non-Damage Business Interruption (NDBI).
If flooding disrupted operations without physically damaging the building, financial losses would not be covered.
This created a structural exposure:
- Revenue interruption
- Operational downtime
- Liquidity pressure
- Balance sheet volatility
The Parametric Solution
The client implemented a layered structure:
- The captive retained a part of the risk
- A commercial insurer acted as a PDBI fronter
- Descartes provided a tailor-made parametric flood reinsurance policy
The parametric layer:
- Triggered payouts based on predefined flood levels
- Protected three strategic locations
- Shielded the captive’s capital from volatility
Instead of waiting for loss adjusters, the payout was linked directly to objective flood data.
Why This Structure Works
This model allows corporates to:
- Retain strategic risk in the captive
- Protect against NDBI exclusions
- Maintain underwriting flexibility
- Improve capital predictability
Parametric insurance becomes a precision protection layer, not a replacement for traditional insurance.
Captive Fronting: Leveraging Parametric Technology
The Challenge
A global clothing manufacturer faced seasonal revenue volatility.
A cooler-than-average spring could significantly reduce sales, threatening supplier payments and cash flow.
The company wanted to insure this exposure using its own captive capital, but required a partner to structure and issue the coverage.
The Parametric Fronting Structure
Descartes partnered to:
- Co-design a temperature-based parametric trigger
- Issue the policy as a licensed carrier
- Pass the underlying risk back to the captive
This structure allowed the retailer to:
- Protect against seasonal revenue decline using objective temperature data for automatic payouts
- Leverage Descartes’ parametric modeling and underwriting expertise
- Access a specialist fronter willing to structure and issue complex, non-traditional risks that many carriers would decline
- Implement a capital-efficient structure supported by competitive fronting fees
Strategic Impact
The fronting model enables:
- Global program issuance
- Regulatory compliance
- Advanced climate analytics integration
- Capital-efficient risk retention
Captives retain control while accessing specialized parametric infrastructure.
Why Parametric Structures Are Strategic for Captives
Across both case studies, key advantages emerge:
1. Protection Beyond Physical Damage
Parametric structures can cover different types of financial losses, including NDBI triggered by measurable events.
2. Faster Liquidity
Pre-agreed triggers eliminate lengthy claims adjustment.
3. Balance Sheet Stability
Captives can cap volatility with structured parametric layers.
4. Adjustable Risk Transfer
Programs can be designed with optimized attachment points and reinsurance structures.
Why Work With Descartes?
Descartes is a global leader in parametric (re)insurance.
We provide:
- Advanced climate and data-driven modeling
- Tailored policy structuring
- Competitive fronting solutions
- Reinsurance integration
- DIC/DIL support for captive programs
Our goal is to empower captives to become strategic financial tools, not just retention vehicles.
Is Parametric Insurance Right for Your Captive?
Parametric structures are particularly suited for:
- Climate-exposed industries
- Retail and seasonal businesses
- Flood-prone operations
- Companies with NDBI exposure
- Corporates seeking capital efficiency
Get a Quote
Interested in strengthening your captive strategy with parametric insurance?
Contact Descartes’ commercial team to design a customized structure aligned with your risk profile: https://descartesunderwriting.com/contact
