Captive insurers continue expanding coverage in property, casualty, and beyond

Sneak peek of new Policy Engine data revealed

Benchmarking is a useful way for captive owners to understand what their peer organizations are doing and how they are using captive vehicles to finance certain risks.

The cornerstone of all benchmarking is high-quality data. Marsh Captive Solutions, the world’s largest captive manager, has extensive data and powerful technology tools, allowing us to inform captive owners about risks, show how their peers are using captives, and identify opportunities for cost savings.

In 2023, Marsh Captive Solutions added 125 new captives, bringing the total in new formations to about 500 over the past four years. Our global captive portfolio accounts for approximately 2000 entities writing $73 billion in premiums, with more than $120 billion in surplus, in 56 domiciles.

Following are some summary findings, which provide just a tiny look into our 2023 data and this is just the beginning. Marsh has been benchmarking captives for more than 15 years, and our latest evolution in captive analysis is a technology tool called Policy Engine, which allows for even deeper insights. Policy Engine analyzes thousands of captive insurance policies and programs, spanning direct, assumed and reinsurance captive portfolios. Make sure to stay up to date with us as we continue to evolve our analysis and discover insights we’ve never had access to before.

Summary highlights

Traditional property and casualty coverages represent the single largest type written by Marsh-managed captives. In 2023, captive premiums for property risks increased by 29%. Casualty premiums — which principally come from auto, general liability, workers’ compensation/employer’s liability, excess liability, product recall, and medical malpractice —increased by 14% in 2023.

Other lines in captives are also growing quickly. For example, premiums for directors and officers (D&O) liability increased by 49% in 2023, commercial life premiums by 25%, and cyber liability by 17%.

Employee benefits are another growing area, accounting for about 20% of Marsh’s global captive portfolio. We are seeing numerous captives funding medical stop loss and international employee benefit programs.

Domiciles where captive premium growth is occurring are part of the story as well. Canada is one of the fastest-growing regions, with captive premiums up 78% in 2023 as Canadian captive owners embrace alternative risk transfer. Much of this growth is in Alberta, which opened to captive formations less than two years ago.

Also showing strong growth were US domiciles including Utah, Arizona, the District of Columbia, South Carolina, and Georgia, which all increased captive premiums by double-digit percentages. Bermuda and the Cayman Islands also reported robust growth in insurance entity formations and premiums.

The bulk of international captive premium growth was in the UK (Guernsey) and Europe, where premiums increased by an average of 15% in 2023. Top growth domiciles were Dublin, Guernsey, Malta, and Luxembourg. Much of the growth is driven by an increased interest in protected cell companies, and proportionality developing in EU regulation as the region embraces a proportional approach to insurance solvency regulation that scales to captives’ size. In the Middle East, captive premiums rose 9% overall, while the Asia-Pacific region saw 4% growth.

Captives and reinsurance

One advantage that captives hold is access to reinsurance, which can expand capacity. Marsh-managed captives last year ceded $11 billion in reinsurance premium, with more than 50% coming from just five industries: financial institutions; aviation, aerospace and space; food and beverage; retail/wholesale; and communications, media and technology. Reinsurance premiums are fairly evenly spread across casualty, property, commercial life, and other lines, including financial and professional lines, and employee benefits.

Notably, Marsh data shows that clients often use their captives as incubators to understand how risks “fit,” and are growing captive premiums over time. At the same, some clients are reinsuring risks into other captives, in addition to using commercial reinsurers.

Limits analysis

Our new technology has made a leap in captive benchmarking. For the first time, Marsh is able to analyze and draw insights from captive limits and reinsurance for specific lines of business. For example, we found that 55% of Marsh-managed captives that write automobile liability offer limits of $1 million to $2 million, while 45% that insure general liability write limits less than $5 million.

On the other hand, more than 85% of captives that insure property risks write limits exceeding $10 million. In financial lines, about 65% of captives funding D&O liability write limits of more than $10 million. For cyber liability, limits continue to vary widely across our captive portfolio.

Industry analysis

We found some surprises within the top five industries that use captives. For example, Communications, Media & Technology (CMT) captives write the most lines of coverage of any industry, with many writing property, cyber, umbrella/excess, extended warranties, medical stop-loss, and others. Additionally, 20% of CMT captives own more than one captive entity.

Healthcare captives, meanwhile, are taking different forms. About two-thirds of Marsh’s healthcare captives are single-parent entities, almost a fifth are cell captives, and 13% are risk retention groups. We also found that many companies in these industries own more than one captive.

Access to detailed data about captive operations is a clear opportunity for captive owners to learn valuable insights. Marsh is working with our clients to improve risk transfer mechanisms through their captives and develop innovative solutions to financing emerging and complex risks.

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Captive insurers continue expanding coverage in property, casualty, and beyond