Navigating the Captive Industry Through the Lens of a Broker

It's no surprise to most insurance professionals that the current insurance marketplace has become increasingly distressed in recent years. The third quarter of 2022 marked the twentieth consecutive quarter of Commercial Property and Casualty premium increases, with average increases of 8.1% across all account sizes. Furthermore, double-digit increases continued on particularly distressed lines such as Commercial Property at 11.2% and Cyber at 20.3%.¹

The ongoing fallout related to the Covid-19 pandemic, climate change, the increase in nuclear verdicts and litigation costs, and inflation have all played a role in driving rate increases. The global risk environment is arguably more complex, uncertain and volatile than it's been in recent decades.

As market headwinds have continued, the pace of new captive formations continues to surge as clients look for alternatives. All major US domiciles, as well as Bermuda and Cayman, saw strong numbers of new captive formations in 2021 and 2022. Vermont, for example, noted 2021 as its fourth highest year on record for new formations, trailing only its first year as a captive domicile and the two years following 9/11.²

Captives have been increasingly attractive to companies and organizations as they face decisions around how to retain vs. transfer more risk, access additional capacity and achieve greater stability over the long term. As insurance brokers navigate these decisions with clients, they must understand when and how to deploy a captive strategy as an effective alternative and how to appropriately set expectations with clients.

To get the full picture and understand how you, as a broker, can decide if a captive is right for your client, get the whitepaper, Navigating the Captive Industry Through the Lens of a Broker.