Captive growth robust but slowing, say Marsh execs

More businesses are establishing captives as they look to retain more risk in difficult insurance markets but the rate of growth is slowing, Marsh executives said at the annual Rims conference.

Captive growth has accelerated in the last three years as capacity in the commercial market has become too expensive or difficult to obtain, they said in a briefing on the final day of the event.

Captive growth has been “off the chart” as clients look to control their own destiny in challenging insurance markets, said Ellen Charnley, president of Marsh Captive Solutions.

Marsh added 370 new captives to its portfolio from 2020 to 2022. This brings the number it manages to approximately 1,900 and premiums under management to $70bn, Charnley said.

And captive growth is still increasing – on a quarterly basis, globally and across lines of business – even though the commercial insurance market is “arguably softening in some areas”, she continued.

Based on Marsh’s analysis, captive growth has been correlated to insurance rate increases across regions.

“We’re seeing growth in Asia Pacific and in Latin America correlated to the insurance (rate increases) going up in a challenged market, which is unheard of because these are regions that were slower to grow over the last ten or 15 years,” said Michael Serricchio, managing director of Marsh Captive Solutions.

For example, captive premiums under Marsh management grew by 58% in the Asia-Pacific region and by 36% in Latin America from 2020 to 2022, Serricchio said.

In North America, captive premiums managed by Marsh grew by 15% between 2020 and 2022.

Growth in North America has mirrored rises in Marsh’s global insurance pricing index, said Allan Smith, client service leader and senior vice president at Marsh Captive Solutions.

“Even though the rate of acceleration is slowing, it’s still accelerating. There are still challenging markets out there. People are looking for alternative solutions, and captives are one of them in the US,” Smith said.

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