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Captive Solutions: The Growth of Captives Continues

Posted on by Larry Neilson

Capitive Solutions: The Growth of Captives Continues

In 2011, there were 5,745 captives formed compared with 5,587 in 2010. And the captive insurance marketplace in 2010 in the U.S. alone wrote over $7.6 billion in premiums, generating $2.6 billion in net profits for its participants.

What’s more, once considered only an option for Fortune 1000 companies, today there is a growing trend among smaller and mid-level companies to participate in this form of risk transfer. We’re seeing a jump in the formation of segregated or protected cell captives as well as micro captives, which are specialized captives that are attractive to mid-sized companies because of their favorable tax benefits.

Additionally, more employers are set to be using captive insurers to cover their workers compensation risks as commercial insurers continue increasing the pricing for this coverage line. Comp coverage in the fourth quarter of 2011, according to a Towers Watson study, increased an average of 4% to 6%. In February of this year, Workers Comp rates increased 3% according to MarketScout.

We’re also seeing captives being used for cyber liability insurance. According to the Department of Banking, Insurance, Securities and Health Care Administration in Vermont, as many as 10 large companies have added cyber risk coverage to their existing single-parent or group captives, or have launched a new captive company specifically to address cyber exposures. (Vermont is the largest captive domicile in the U.S.).

And according to a study released by the Captive Insurance Companies Association (CICA) in March, “utilization of captives for employee benefits has significantly increased over prior surveys where minimal usage had always been reported. Slightly more than 80% of this year’s survey participants reported placing only employee benefits, or some employee benefits in addition to their property casualty risks, into their captives. This is a clear indication of not only expanded utilization of captives, but also the benefit of captives as a risk management and risk financing tool for a myriad of corporate risks.”

The CICA study also shows that captive insurance has permeated into all industries, including manufacturing, healthcare, financial services, and all other (non-healthcare) services.

Caitlin-Morgan can help you provide your clients with a captive solution as a cost-effective risk management and risk-financing tool. We provide a variety of captive solutions including: Risk Retention Group, Single Parent Captive, Association Captive, Agency Captive, Protected Cell Captive, Rent-a-Captive, Series, LLC Captive.  Call us at 877.226.1027.

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