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Captive Insurance

By combining deep captive expertise with industry-leading analytics, we can help your organization to use a captive insurance company to manage risk on your own terms.
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As they face higher insurance rates, lack of capacity, and more stringent carrier terms and conditions, many leaders are exploring alternative strategies to finance their risk. One of the most popular is through a captive insurance company.

A captive can be a powerful tool for your organization to take complete control of risk, while gaining greater financial flexibility and protection. For example, any surpluses generated potentially can be used to fund vital investments across your operations.

One in four captives worldwide is managed by Marsh. More captive owners choose us than any other captive partner, so you can be confident that you have the best experience, expertise, and resources in your corner.

Our team of specialists can help your organization create a captive program that aligns with your strategic and financial goals. By combining our expertise with industry-leading analytics, we are prepared to assess your needs, make recommendations, and quantify the advantages that captive insurance can offer your organization — today and in the future.

Contact our specialists to manage risk on your own terms and maximize your captive’s performance.

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FAQs

Captive insurance is a risk financing mechanism in which a company insures itself against future losses. In a captive insurance arrangement, the insured brings its risk in-house by creating a licensed company that provides insurance to its parent organization and/or affiliates.

This is different from simply acting as your own insurer. Captive coverage is formalized and regulated, held to many of the same requirements as the commercial market. Captive investors and shareholders enter into it to take on risk, minimize premiums and reap the financial rewards of their actions. But unlike commercial insurance, you decide whether to retain or reinvest the insurer’s profits throughout the parent company. Captive coverage is also designed to fit many of the unique, emerging risks your organization may be facing.

By forming its own insurance company to protect against its unique business risks, a company can manage difficult-to-insure risk exposures, cover gaps in its risk management program, and capture profitable premium that would otherwise be paid to commercial insurers. A captive can create value through financial, strategic, and operational benefits.

Captives are created to enhance a business’s ability to manage the retentions and deductibles associated with traditional risk transfer programs. Typically, a company will select service providers, including a captive manager such as Marsh, who can support the creation, implementation, and day-to-day operation of the program.

Similar to traditional insurance programs, a captive issues policies, processes claims, and follows all applicable regulations. However, the key difference is that a captive gives its parent company the option to retain or distribute the profits across the organization, whereas a traditional insurance company retains those profits.

By placing a captive at the core of your organization’s risk management program, you can achieve a reduced total cost of risk, stabilize risk capacity, and gain access to reinsurance.

Other potential benefits unique to captives include:

  • Better approach to funding for future catastrophic losses such as cybercrime, terrorism, and product liability.
  • Coverage for unique risks that may be unavailable in a traditional insurance arrangement.
  • Potential to build capital and surplus, as well as fund insurance claims, by paying and setting aside premium payments and underwriting investments to cover losses.
  • The ability to capture underwriting and performance management data to build a statistical base, improving the ability to secure coverage with insurers at acceptable terms and pricing.

A captive insurance program can help your organization reduce traditional and emerging risk management pain points. And, by achieving a greater control of risk and reduced costs, your business can enhance your overall economic security and profitability.

Although companies across all industries can enjoy the potential benefits of a captive, those who do create their own captive insurance program typically share the following characteristics:

  • Risk exposures that are difficult to insure or uninsurable in the commercial environment.
  • A strategic approach to managing risk, exposures, and cost of risk rather than purchasing insurance at the lowest price.
  • A commitment to improving their risk profile.

With several unique structures available to your organization, you can customize your captive insurance program and coverage to match your unique risk exposures and strategic initiatives.

For business leaders looking to create their own captive insurance program, there are several structure options.

  • Single parent captive: An organization creates its own insurance company to only insure its own business and its employees or those of a controlled (but unaffiliated) business, such as a management contract. This model is ideal for larger companies that need additional discretion, confidentiality, and/or complete risk control ownership. Single parent captives represent the largest proportion of captive insurance programs at approximately 85%.
  • Cell captives: Also known as rent-a-cell facilities, protected cell captives (PCC), and segregated cell captives, this program is sponsored by a captive insurance company so that business owners don’t have to create their own. It allows a business to benefit from a captive insurance company without the upfront costs, capital investment, or maintenance associated with forming and managing an owned captive. Cell captives are now seeing significant growth because they are faster, less expensive, and simpler to enter. They provide one or two lines of coverage to those who need to wall off different risks in separate cells.

Cell captives are now seeing significant growth because they are faster, less expensive, and simpler to enter. They provide one or two lines of coverage to those who need to wall off different risks in separate cells.

  • Risk retention group (RRG): RRGs are only available within the US. Businesses with similar insurance needs will create and own a liability insurance company to pool risk. This structure is useful for potentially costly liabilities such as automotive risks related to trucking and transportation or medical malpractice. However, it is not applicable for first-party risks such as property or workers’ compensation.
  • Group captives: Ownership of this captive program is limited to only the insureds, either a group of heterogeneous (association or industry-specific) or homogeneous (non-related) companies. The captive exists primarily to provide greater long-term cost stability than the traditional market allows.

With the option to enter any of these structures, no matter what industry you are in, you could potentially achieve improved risk management by building a captive insurance program of your own.

Once a captive is up and running, custom reporting and benchmarking against peers can provide insight into your program within the context of your industry, company size, and/or region.

Benchmarking will help to answer important questions such as:

  • Is the captive aligned with accelerating our corporate objectives?
  • How are my peers using their captives for certain risks?
  • How can our captive respond to emerging risks?

Of course, such profiling relies on excellent risk and insurance company data. One-in-four captives worldwide are managed by Marsh. Our insights enable you to improve captive efficiency, identify areas for potential coverage, and provide data-backed recommendations to your C-suite.

In recent years, the pandemic and other global uncertainties have made the commercial insurance market more challenging. This has fueled significant interest in captive insurance alternatives.

Now, following a year of economic uncertainty and dynamic market conditions, organizations around the world are increasingly looking towards captives as a means of managing high-severity risks and gaining enhanced flexibility and more control over their total cost of risk. Currently, it is estimated that there are more than 6,000 captives worldwide.

Captives can be used to insure both traditional risks as well as emerging risks. Major lines of coverage include all-risk property, casualty, automotive liability, workers’ compensation, general liability, and products liability to name a few.

Emerging risks showing rapid growth in recent years include medical stop loss, voluntary benefits, cyber liability, and directors and officers liability. In this report, we also highlight the increase in third-party risks. These risks, in combination with traditional risks, are helping drive the creation of protected cell captives which account for 1 in 4 of our new formations. For details, please see the Captive Insurance Market Report 2023.

Although captive insurance and self-insurance are both types of risk financing mechanisms, they do vary.

Self-insurance is a formalized way of retaining all types of insurance risk. Rather than transferring risk to a third-party commercial insurance company, a self-insuring firm sets aside money to fund future losses.

Similar to self-insurance, captive insurance is a risk financing mechanism in which a company insures itself against future losses. However, in a captive insurance arrangement, the insured creates a more formal arrangement for protecting against its unique business risks by creating its own insurance company.

By working with an experienced captive manager, your organization can achieve potential benefits unique to a captive insurance program, including better protection against catastrophic losses and coverage for risks that may be unavailable in a traditional insurance arrangement.

Although captive insurance programs come with many potential benefits, there are some important considerations that may factor into your business’s decision when it comes to creating one:

  • Capital commitments: A parent company must contribute the capital required to support the captive’s business plan as determined by the insurance regulator in the selected domicile. Although these funds remain within the parent’s consolidated group, they may not realize the same return as they would have if invested in the parent’s operations.
  • Operating cost: Your business should account for any start-up and annual operating expenses, such as a feasibility study and ongoing captive management.
  • Time commitment: The parent company’s management team will need to devote time to the captive. Creating a captive is not a short-term initiative used to achieve an immediate goal. It's a long-term commitment to an organizational risk management strategy.

By allocating the proper resources to your single parent, RRG or group captive, your organization will be positioned to gradually achieve a better grasp on claims and loss control efforts, as well as lower operating costs compared to commercial insurance.

With specialized expertise and global experience, the captive team at Marsh can work with you to create a comprehensive solution tailored to your organization's unique risk exposures and insurance needs. Leveraging industry-best data analytics and benchmarking, we'll help you manage risk on your own terms and gain more control of your company's total cost of risk.

A domicile is the location where a captive insurer is licensed to do business. There are more than 70 captive domiciles around the world – but don’t let that number overwhelm you. Each and every one can be grouped into two categories: onshore or offshore. An onshore domicile is located within a major country or region, such as the US or the EU. An offshore domicile is located outside a major country and includes ones such as Bermuda, the Cayman Islands, Guernsey, and the Isle of Man.

How do you decide which domicile is right for you? Based on your unique organizational needs, your captive manager will work with you to determine what domicile makes sense to start with and whether any changes should be made over time.

Our professionals in every domicile can help guide you through the life cycle of a captive – from feasibility through optimization. Here’s how you can reach out to us to get started:

Americas

Arizona

12145 E. Camelback Road, Suite 600
Phoenix, Arizona 85016
Allan Smith
+1 714 356 6208
allan.smith@marsh.com

Barbados

Limegrove Centre, 1st Floor
Holetown, St. James BB24016, Barbados
Nicholas Crichlow
+1 246 436 9929
nicholas.crichlow@marsh.com

Bermuda

Power House, 7 Par-La-Ville Road
Hamilton, HM11
Michael Parrish
+1 441 298 6628
michael.parrish@marsh.com

British Columbia

5657 Spring Garden Road, Park Lane Terraces
Halifax, Nova Scotia B3J 3R4, Canada
Patrick Ferguson
+1 902 429 3704
patrick.ferguson@marsh.com

Cayman Islands

Governors Square, Building 4, 2nd Floor
23 Lime Tree Bay Avenue, PO Box 1051
Grand Cayman, KY1-1102, Cayman Islands
Kieran Mehigan
+1 345 914 5744
kieran.mehigan@marsh.com

Connecticut

501 Merritt 7
Norwalk, Connecticut 06856-6010
Arthur Koritzinsky
+1 203 229 6768
arthur.g.koritzinsky@marsh.com

Hawaii

745 Fort Street, Suite 1100
Honolulu, Hawaii 96813
Scot Sterenberg
+1 808 585 3591
scot.sterenberg@marsh.com

Nevada

12145 E. Camelback Road, Suite 600
Phoenix, Arizona 85016
Allan Smith
+1 714 356 6208
allan.smith@marsh.com

New York

48 S. Service Road, Suite 310
Melville, New York 11747
Nisala Weerasooriya
+1 631 577 0600
nisala.m.weerasooriya@marsh.com

South Carolina

151 Meeting Street, Suite 301
Charleston, South Carolina 29401
Gavin Foggon
+1 843 577 1030
gavin.foggon@marsh.com

Texas

2929 Allen Parkway, America Tower
Houston, Texas 77019
Julie Patel
+1 713 276 8600
julie.patel@marsh.com

Utah

15 West South Temple, Suite 700
Salt Lake City, Utah 84101
Brandy Alderson
+1 801 533 3646
brandy.alderson@marsh.com

Vermont

463 Mountain View Drive
Colchester, Vermont 05446
Chris Varin
T: +1 802 864 8133
chris.a.varin@marsh.com

EMEA

Dubai

Gate Village 7, Level 3, Office No. 301
Dubai International Financial Centre
PO Box 606770, Dubai, United Arab Emirates
Ronny Vellekoop
+971 (0)4 520 3822
ronny.vellekoop@marsh.com

Dublin

4th Floor, 25-28 Adelaide Road
Dublin 2, Ireland
Brian McDonagh
+353 (1) 605 3056
brian.mcdonagh@marsh.com

Guernsey

PO Box 155, Mill Court, La Charroterie
St Peter Port, Guernsey GY1 4ET
Ian Drillot
+44 1481 719293
ian.drillot@marsh.com

Isle of Man

1st Floor, Goldie House, 1-4
Goldie Terrace, Upper Church Street
Douglas, IM1 1EB, Isle of Man
Nick Gale
+44 (1624) 630506
nick.gale@marsh.com

Malta

Level 3, The Hedge Business Centre
Triq Ir-Rampa ta San Giljan, Balluta Bay
St Julian’s, STJ1062 Malta
David Galea
+356 23423106
david.galea@marsh.com

Liechtenstein

Kirchstrasse 12
9490 Vaduz, Liechtenstein
Alexandra Luescher
+41 (41) 7253725
alexandra.luescher@marsh.com

Luxembourg

74 rue de Merl
L-2146 Luxembourg
Danilo Giuliani
+352 49 69 51 307
danilo.giuliani@marsh.com

Sweden

Torsgatan 26 (Visiting address Torsgatan 22)
113 21, Stockholm, Sweden
Alexander Dahlmann
+46 (0)8 412 42 41
alexander.dahlmann@marsh.com

Switzerland

Tessinerplatz 5
8002 Zurich, Switzerland
Matthias Rittmeier
+41 79 815 7348
matthias.rittmeier@marsh.com

ASIA PACIFIC

For offices in the Asia Pacific region, please contact:

Stuart Herbert
+65 6922 8522
stuart.herbert@marsh.com

Australia

Collins Square,
727 Collins Street
Melbourne VIC 3008
Australia

Labuan

Parcel No. 1-1, First Floor,
Paragon Labuan,
Jalan Tun Mustapha, 87000
Federal Territory of Labuan, Malaysia

New Zealand

Level 11, PwC Tower
15 Customs Street West
Auckland, New Zealand

Singapore

8 Marina View
#09-05 Asia Square Tower 1,
Singapore 018960

Our people

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Nisala Weerasooriya

Marsh Captive Solutions Leader, Asia Pacific