business expenses that are embedded in the agency captive structure.
The Future Is Bright for Captive Expansion
The volatility of the underwriting cycle in traditional insurance markets has been a driving factor for captive growth in the past, and the recent hard market was no exception. The number of captive domiciles continues to expand with both U. S. and Europe onshore captives looking set to thrive in the next few years, while pressures in traditional insurance markets seem set to continue – at least in some lines of business like commercial automobile and trucking.
At the same time, the growing focus on long-term sustainability is opening up opportunities for captives to play even a bigger role.
Much of the recent captive growth has involved U. S. parented captives, and most of that has been onshore in the U. S. Indeed, states have been falling over themselves in the last decade or so to pass captive laws. And, for the first time ever, last year saw Vermont overtake Bermuda and the Cayman Islands to become the world’ s largest captive domicile according to business insurance rankings.
Meanwhile, in the U. K., Lloyd’ s recently announced its first captive for many years, and the U. K. government is being urged to make it even more attractive to host onshore captives in the country.
At the same time, Italy is also being urged to attract new captives and there is pressure growing in Spain and Germany to add new territories to the existing domiciles, such as Ireland, Sweden and Switzerland.
The future being bright is not just about new captives, as perhaps more importantly, companies are putting more businesses through their captives. Indeed, captive premiums grew again in 2023, driven by both existing and new captives.
Lastly, according to expert Ken MacDonald of R13k Consulting,“ history and statistics tell us that captives do not reduce in total numbers in a soft market, or even a prolonged soft market. This is a testament to the totality of the benefits that captives deliver.”
Timeline Considerations There are multiple facets involved in setting up an alternative risk financing or captive insurance structure that logically requires proper due diligence and serious timing considerations to protect everyone’ s business interests.
To ensure the whole process runs as smoothly as possible, the captive industry experts suggest the shortest timeline to establish a captive insurance vehicle is six weeks post a captive feasibility study. Considering the critical nature of the feasibility study component within building a captive program, and that the feasibility study process alone will take four to six weeks, a rational assumption for building a meaningful captive model is three to six months start to finish.
Conclusion
As indicated previously, there is a growing interest today, on a worldwide basis in captive programs considering the volatile traditional insurance market. In fact, with regard to supporting the emergence of captive solutions in our marketplace, we need to recognize one of the leading commercial insurance agent / brokers serving the U. S. CR / ST marketplace, USI Insurance Services, for their recently well prepared and delivered webinar sponsored by the Specialized Carriers and Rigging Association, entitled” Captive Insurance Programs: Is Your Company Captive Ready?”
USI made a highly insightful and professional presentation on captive insurance and risk management for crane, rigging and specialized transport operators in this webinar. USI is considered a market-leading insurance agent / producer of risk management-based insurance in our marketplace for over the past 30 years. The USI presentation emphasized a key element in captives having the ability to unbundle risk services for the customer / user to tangibly mitigate their risk.
We should recognize Jeff Haynes, Randy Proos and James Stovall for making this important presentation in support of alternative risk financing methods to protect the futures of crane-rigging and specialized transport customers.
www. contractorshotline. com May 2, 2025 9