Washington DC
04 August 2017
Reporter: Becky Butcher

Financial institution dominance of captive market paves way for smaller banks

Financial institutions’ continued of dominance of the captive insurance market could pave the way for smaller banks to enter the market, according to industry experts.

A recent Marsh Captive Landscape report revealed that financial institutions continued to lead the way in the captive insurance market last year with a 24 percent share.

It was also reported that they hit premium volumes of approximately $24.6 billion, and a surplus of around $40.05 billion.

As Ellen Charnley, global sales leader for Marsh’s global risk and specialties division, explained: “Financial institutions have had the greatest share of the captive market for as long as Marsh has produced the Captive Landscape Report, which is now in its tenth year.”

With the passage of the Protecting Americans from Tax Hikes Act increasing the premium limit associated with the 831(b) tax election to $2.2 million, smaller US banks have the opportunity to enter captive insurance.

Bill Mourelatos, director at Aon Captive & Insurance Management, commented: “For smaller community banks that have historically not used captives as they struggled to meet risk distribution and risk transfer hurdles, the Protecting Americans from Tax Hikes Act provides them an opportunity through risk pools to use micro captives to insure risk and obtain the advantageous tax benefits that were not previously available.”

Josh Miller, CEO of KeyState, who also sits on the Nevada Captive Insurance Association board, said he has already seen a steady increase in the use of captives by mid-size institutions.

Miller said: “As banks see their peers implementing captive insurance structures and as their primary regulators become more familiar and comfortable with the structures, I anticipate continued adoption of the structure by financial institutions.”

The full article on financial institution captives will be available to read in the next issue of Captive Insurance Times, published on 9 August.

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