State of the Insurance Market Report

2025 Initial Outlook and 2024 Wrap-Up

Captives

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The captive insurance market continues to thrive in 2024, driven by ongoing economic pressures and flexible risk management solutions.

Despite some easing in commercial insurance premiums, businesses face persistent challenges from healthcare costs, legal verdicts, cyber threats, and climate-related risks. Captives are increasingly seen as a versatile tool for risk retention and transfer, with applications expanding beyond traditional areas into property coverage, excess liability, and innovative revenue-generating programs. This trend reflects a growing recognition of captives as a strategic asset for businesses seeking to optimize their risk financing and maintain control in an uncertain market environment.

Market Conditions

Although the global reinsurance markets were profitable in 2023, reinsurance pricing continued to increase, with no relief expected until 2025. For many, the solution was to retain more risk in a captive insurance company, allowing them to choose the optimum point at which to transfer risk to third parties.

Workers’ compensation and general liability risks continue to be foundational pieces for many captives. Given the dramatic changes in property markets, there is a heightened interest in utilizing captive solutions for property risk. There are emerging solutions for those willing to deploy capital to retain a meaningful level of risk. Hard markets in excess liability layers are also proving to be a pain point in which a captive can offer more unique solutions.

As more businesses explore the benefits of captives as an alternative risk financing solution, there has been an uptick in the use of a captive to provide insurance backing to warranty programs, tenant damage and security deposit waivers, self-storage contents protection, and the like. When well run, these captives offer a revenue stream complementary to the core business. The most sophisticated clients are writing multiple lines of coverage through their captive to maximize the utility. For example, many captives have successfully incorporated medical stop-loss for their self-funded group medical plans to further mitigate costs and retain higher control.

Captives remain a strong alternative to traditional insurance. We expect no material changes in the captives market.

Recommendations

Interested clients should start by becoming more knowledgeable about how captives are structured and how they can help them manage risk, no matter the size of their business. From there, we recommend:

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Develop a list of major causes of loss that can adversely impact revenue.

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Identify insurance programs which are commercially available and those which are not.

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Retain a risk management consultant(s) for guidance on possible ways to address these risks.

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Conduct a feasibility study to determine the expected return on investment of a captives program.

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Consider retention of risk and other techniques to develop the most cost-effective program.

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The contents of this report are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.