How are businesses harnessing captive insurance in a changing risk landscape?

As businesses face rising insurance rates, capacity constraints, and stricter terms from carriers, many are exploring captives as an alternative risk financing strategy. Captive insurance offers an opportunity for greater financial flexibility, more risk management control, and the chance to create a customised insurance vehicle that meets the organisation’s demands.

Marsh, the world’s largest captive manager, manages one in four captives globally. With extensive proprietary data and advanced technology tools, Marsh’s captive benchmarking capabilities help organisations understand peer trends and identify emerging risks and cost-saving opportunities.

In the latest Captive Trends and Insights Report, several key findings highlight the growth of captive premiums across global domiciles:

• Global Premium Growth: Marsh-managed captives saw premiums reach $73 billion, reflecting a steady upward trend in captive utilisation.
• Domicile Trends: The Asia-Pacific region experienced a 4% increase in captive premiums, with the rate of growth moderating partly due to the easing of hard market conditions in traditional markets.

In Asia, a notable increase in demand among businesses in the energy and power sector can also be observed due to capacity constraints in the retail insurance market.

Assessing captives for long-term success

While the rise in Asia-parented captives is notable, it’s important to ensure that a captive insurance structure is the right solution for long-term risk management. Captives can provide substantial benefits, but their effectiveness depends on careful planning and execution.

The Captive Feasibility Study ?supports businesses in making an informed decision on the suitability of a captive for their specific needs. The study emphasises the financial viability and long-term sustainability of a captive, as underestimating the full operational costs of managing a captive or overlooking regulatory complexities can diminish the effectiveness of the strategy.

By assessing these potential pitfalls along with the short and long-term vision of the organisations’ risks, the study offers a roadmap to successfully implement a captive insurance program aligned with the organisations’ broader financial and strategic goals.

Working with the right expertise

Given the complexities involved in setting up and managing a captive, it is essential to partner with a risk advisor that brings deep experience and robust data analytics capabilities to meet the specific needs and address potential challenges of the organisations.

Download the full Marsh Captive Benchmarking Report ?to gain in-depth insights into the latest trends.