Captive Insurance Study

Captive insurance companies are a critical risk management tool for both groups and individual owners.  Captives are estimated to write, one way or another, approximately 25-30% of the commercial insurance market.  A recent study by Marsh, entitled “Next Generation Captives: Optimizing Opportunities,” (see here, here & here) surveyed 900 of the estimated 2,750 captives owned by public companies worldwide.  Some key points:

• Premium written by this group totals $55-60 billion

• While all of the Dow Jones 30 own captives, middle market companies are making greater use of captives

• Captives are used slightly more for property risks than liability

• Interest in and growth of captives remain strong despite the current soft market

• Expense savings are real: 65% of the captives surveyed had expenses of 5% or less

• This group of captives is significantly better capitalized than necessary

• More than 20% of the captives in the group issue per occurrence limits of $50 million or more

The study also notes that approximately 60% of the single parent captives surveyed do not use reinsurance.  While this might be surprising, we would guess that many of these captives are either fronted or insuring net, and additional limits and other (reinsurance-like) protections are utilized via fronting or excess carriers.  However, it is not clear whether the structure results in the same level of protections as outgoing reinsurance from the captive would.

Captives continue to be an important risk management tool and will have even greater impact as the market begins to harden, as expected (see here & here).

Brought to you by Tennant Risk Services.

 

Comments

[Will]

The life and health insurance market needs both captive and non-captive insurance agents and companies to keep the market as competitive as possible. You should post an article about the non-captive insurance companies and how we don't push one particular product, rather we shoot to get our clients the lowest cost policy available.