<div><p><em>Randy Sadler is a risk management expert and serves as principal and CMO at </em>CIC Services<em>, a captive insurance management firm. </em></p><p>An insurance program can renew on time, look sound in a presentation and still leave a company exposed in ways leadership didn’t fully appreciate until a disruption is already underway. That risk feels especially relevant today because a more competitive insurance market can create confidence that’s only partly earned. Aon reported in early 2026 that insurers had ample capacity, but easier placement doesn’t erase the terms, conditions and retained layers that still shape the financial outcome of a loss.</p><p>For finance leaders, the issue reaches far beyond whether a policy exists. What matters is how a loss moves through the business, how much is recoverable, how quickly recovery arrives and how much strain remains with the company while the claim is being adjusted. Those questions affect liquidity, planning and earnings in ways that many renewal conversations don’t fully surface.</p><section id="where-coverage-can-fall-short"><h2>Where Coverage Can Fall Short​</h2><p>Insurance shortfalls don’t always begin with a complete absence of coverage. More often, they emerge through the details of how the policy responds under stress. A sublimit may leave a company with only partial reimbursement. A waiting period may push the earliest and most disruptive stage of the event back onto the business. A policy may respond to one category of loss while leaving related costs outside the payable claim. By the time those distinctions become clear, leadership may already be dealing with delayed production, vendor disruption, customer communication and management time pulled away from core operations.</p><p>Coverage can be valuable and still incomplete. A company may have made prudent decisions in the commercial market and still discover that the retained portion of the event is much larger than expected. For a finance leader, that retained exposure isn’t a technical footnote. It can become a planning issue very quickly.</p></section><section id="why-this-belongs-finance-office"><h2>Why This Belongs In The Finance Office​</h2><p>The financial consequences of retained exposure show up in places finance leaders track closely, including cash flow, earnings volatility, capital allocation and flexibility. KPMG found that 64% of organizations had integrated risk and resilience into overall strategy and planning decisions, while 58% had integrated resilience into business function planning. That gap suggests many companies recognize resilience as a leadership issue, but fewer have embedded it consistently into the operating and financial decisions that determine how disruption is actually absorbed.</p><p>The CrowdStrike-related outage in July 2024 is a useful example because it affected industries including travel, finance and healthcare and raised immediate questions about what insurance would and wouldn’t respond to. Reuters reported that standard business interruption coverage often wouldn’t apply to that kind of event without specific cyber coverage—and reported estimates that insured losses could reach $400 million to $1.5 billion. That’s exactly the kind of mismatch finance leaders need to think through before the next event arrives.</p></section><section id="what-stronger-resilience-thinking-looks"><h2>What Stronger Resilience Thinking Looks Like​</h2><p>A more disciplined review can help leadership understand where recovery could be delayed, where limits or sublimits may prove insufficient and which categories of cost are likely to remain internal even under a well-constructed program. In many cases, that leads to practical improvements such as pressure-testing limits, revisiting waiting periods, reviewing contingent business interruption exposure and identifying where concentration risk among key vendors could amplify the loss.</p><p>That review also helps leadership separate confidence from assumption. A company may discover that its program is stronger than expected in some areas and weaker in others. It may find that certain retained layers are acceptable because they fit the company’s financial tolerance, while others deserve closer attention.</p></section><section id="why-captive-analysis-belongs-discussion"><h2>Why Captive Analysis Belongs In The Discussion​</h2><p>Captive analysis can be a valuable part of that broader review. A captive is an insurance company owned by the business itself. Companies use captives to insure selected risks or layers of risk through a structure they control, often alongside commercial insurance rather than as a wholesale replacement for it.</p><p>The usefulness of a captive review extends beyond whether the company should form one. A serious captive analysis forces leadership to examine which exposures are being transferred effectively, where that transfer starts to thin out and which losses the business is already retaining in practice. The process often surfaces assumptions that have lingered through multiple renewals and helps clarify whether retained exposure is being managed intentionally or accepted by default.</p><p>That’s why the exercise can still be worthwhile even when the company decides against a captive. The analysis can sharpen leadership’s view of what belongs in the traditional market, what remains on the balance sheet and how those retained layers could affect the business during a real disruption.</p></section><section id="question-worth-asking-today"><h2>The Question Worth Asking Today​</h2><p>The real question for today is whether leadership understands how a loss would flow through the business, what the company would likely recover and which costs would still remain after the claim process begins. Insurance remains essential, but it’s only one component of financial protection. The companies that will be better positioned are likely to be the ones that understand that distinction before the next disruption tests it.</p><p><em>The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.</em></p><hr/><p>Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?</p><hr/></section></div>

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<p>Randy Sadler, a risk management expert, emphasizes the importance of understanding insurance policies beyond their surface appeal. Companies may face significant financial exposure due to policy details, such as sublimits and waiting periods, which can lead to unexpected losses during disruptions. Aon reported a competitive insurance market, but finance leaders must consider how claims affect cash flow and earnings. Integrating risk management into financial planning is crucial, as seen in the CrowdStrike outage example. Captive insurance analysis can help clarify retained exposures and improve resilience against future disruptions.</p>

The Costly Insurance Assumption Finance Leaders Can’t Afford