Shared-risk models, tech reshaping equipment finance insurance

Shared-risk models and advanced data sharing are changing the insurance landscape in equipment finance as lessors seek a competitive edge.  

The global heavy-equipment insurance market is projected to nearly double to $34.7 billion by 2033 from $18.7 billion in 2024, according to consulting and research firm DataIntelo.  

Meanwhile, the global machinery leasing market is expected to grow nearly 50% to $733.6 billion by 2029 from 2024, according to the Business Research Co.  

More lessors and insurance providers are shifting to shared-risk models to seize opportunities in the wake of higher premiums, rising replacement costs and other factors that are “squeezing margins,” Brendan Curran, business development manager for North America at Acquis, told Equipment Finance News. Acquis provides specialized insurance solutions for equipment lessors. 

“We see companies moving to a shared-risk model with the carriers so that they can potentially increase their income because, historically, there’s very low claims that come from this business,” he said.  

Essentially, low claims make shared-risk models work because the insurers are better positioned to collaborate with lessors rather than shift costs to lessors, enabling greater flexibility in pricing, coverage terms and underwriting capacity.  

The captive effect 

Creating a captive insurance arm is one way lessors are increasing income potential while sharing risk, Curran said. 

“What they do is set up a separate company, which basically becomes the insurer,” he said. “Premiums come in, and then the risk is shared by some predetermined percentage. Let’s just say, for example, if a claim comes in, they split the claim 50/50, but any remaining income with them gets split as well.” 

Even though the lessor is not technically the insurance carrier under this arrangement, the captive is viewed as a value-add service that attracts customers by extending coverage tied to the leased equipment, he said. 

“A lessor might be able to provide coverage to a lessee that’s potentially lower [cost] than what they might get from their own broker, depending on the size of the company, their own risk history and things like that,” he said. “Oftentimes, these programs provide a service to the customer that — No. 1, it’s easy — and they can be competitive with what they can source on their own.” 

Tech solutions  

Advanced data sharing and other tech solutions are also reshaping insurance in equipment finance. For example, Daimler Truck Financial Services recently partnered with Geico so customers could share data in real time through Daimler’s telematics platform.  

The data allows Geico to “better assess risk, reward safe driving and deliver meaningful savings to our customers,” Chris Sions, head of partnerships at Geico, stated in an Oct. 27 Daimler release. 

With lessors, lessees and insurers able to immediately share information, “there’s a lot of efficiencies that can be gained,” Curran said. Customer portals, APIs and agentic AI are among effective tools for processing and sharing data, he added. 

“You can have AI agents scan documentation to make sure it has all the necessary information and potentially immediately respond back to the customer,” he said. 

Check out our exclusive industry data here.