Oldwick
03 August 2017
Reporter: Becky Butcher

Captives continue to play ‘vital role’ globally


US captives ended 2016 on “strong form” as pre-tax profits rocketed and underwriting results reflected a relatively benign year for catastrophes.

A.M. Best’s special report on US captives revealed that captive revenue still accounts for less than 10 percent of the estimated global commercial market of $800 billion, but they have become an “integral and well established part of the market”.

According to the rating agency, its captive insurance composite ended 2016 in “strong form” with pre-tax profits up more than 15.8 percent to $1.6 billion. The total figure included more than $803 million in underwriting profit, of which $491 million was related to favourable prior year reserve development.

“Exceptional” underwriting results also helped the sector post strong pre-tax operating earnings, which reached a new high in 2016, because of strong attritional results and another year of relatively “benign catastrophes”, whether natural or man-made.

“We believe these results are in part a reflection of the close alignment of interests and strong risk management, safety, and loss control functions,” A.M. Best’s report said.

In 2016, captive premiums increased “modestly” by 3.2 percent, reversing the slight declines of recent years. Last year, premium growth was largely due to increases in medical professional liability and commercial multi-peril.

Also contributing to the increase in net premiums were moves by several rated single-parent captives to take on more risk premium, raise deductibles, or change reinsurance.

“In most cases, these were existing lines for which the captive was comfortable taking on a greater portion of this risk. Pricing and availability in the commercial sector sometimes play a role in the captive owners’ decision-making.”

“At other times, the captive will look to take on a new product, like medical stop-loss or cyber, which may, however, be heavily reinsured in the first few years—as the new product incubates, more of the net risk is brought into the captive.”

More news
The latest news from Captive Insurance Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Crawford & Company appoints Latin America lead
18 August 2017 | London | Reporter: Becky Butcher
Crawford & Company has named Roberto McQuattie as regional head of Latin America to oversee operations across the company’s network of 15 offices in the region
London to bring innovation to ILS market
18 June 2017 | London | Reporter: Becky Butcher
London will be able to bring the kind of innovation to the insurance linked-securities (ILS) seen in Guernsey’s first ever blockchain-backed deal, according to Malcolm Newman of SCOR
Excellent ratings for Scotia Reinsurance
17 August 2017 | Oldwick | Reporter: Becky Butcher
A.M. Best has assigned a financial strength rating of “A (Excellent)” and a long-term issuer credit rating of “a+” to Scotia Reinsurance, located in Barbados
Captive industry prepares to gather in North Carolina
17 August 2017 | Charlotte | Reporter: Becky Butcher
The North Carolina Captive Insurance Association is ready to kick off its third annual event on 21 August, with more than 200 delegates expected to attend
Greenlight for Michael Belfatti
16 August 2017 | Grand Cayman | Reporter: Becky Butcher
Greenlight Capital Re has appointed Michael Belfatti to the newly created position of COO
Orion Risk Management enhances client network
16 August 2017 | California | Reporter: Becky Butcher
Orion Risk Management has partnered with Friedmann & Friedmann Insurance Services, a South California-based insurance broker, to enhance its client and employee network
JLT Re welcomes new VP for western region
15 August 2017 | San Francisco | Reporter: Jenna Lomax
Ferrier will be based in the San Francisco office from September, focusing on global, regional and managing general agent business