The Rise of Captive Insurers in Risk Management
Organizations are increasingly utilizing captive insurers as strategic tools for risk management, adapting to changes in the commercial insurance landscape. This growth trend in captives is expected to continue into 2025, with both existing owners expanding their use and new entities being formed across various company sizes. Despite reductions in property insurance rates, several sectors remain challenging for policy buyers, contributing to captive growth.
Business Insurance data reveals that the number of captives has risen to 6,549 across 80 domiciles, a 3.8% increase from the prior year. The United States leads in captive usage, while interest is rising in Europe, Asia, and the Middle East, according to Will Thomas-Ferrand of Marsh. Marsh reported over 100 new captives formed in 2025, with gross written premiums increasing by 3.3% to $79.14 billion.
While property and casualty lines dominate, non-traditional risks such as cyber and environmental liability are gaining traction. Steve Bauman of Axa XL notes that captives have evolved into essential risk management tools rather than temporary market cycle solutions. Captives are adapting to market fluctuations by exploring new risk areas in softer markets and increasing retentions during harder periods.
Emerging risks, particularly those related to artificial intelligence, are prompting more widespread use of captives. Dawn Hiestand of Artex North America observes growth in captive adoption as companies seek novel and expanded structures. Aon’s Nancy Gray highlights recent growth in liability lines due to ongoing pricing pressures and the influence of auto and excess liability as growth drivers.
Kristen Peed from Sequoia Benefits and Insurance Services emphasizes the need for a strategic long-term perspective on captives. Sequoia plans to expand its Arizona-based captive, Mariposa, with broader strategic objectives. Smaller firms, including family offices, are also exploring unique captive strategies, combining both commercial and personal lines, which drives domiciles to evaluate these dual aspects.
Property coverage remains crucial amid stabilized commercial insurance pricing, with captives filling gaps and accessing reinsurance for hard-to-insure perils. In catastrophe-prone regions like Florida, captives complement traditional reinsurance strategies. Marsh and Davies Group report captives are paired with parametric covers to address climate risks, underscoring their strategic importance in tailored risk solutions.
Despite alleviated property conditions, liability sectors face ongoing challenges with high-frequency, low-severity risks. New captive formations are emerging in health care sectors with long-term care exposures, particularly in New York and Florida. Rising health care costs have spurred greater inclusion of medical stop-loss captives, with growing international interest in integrating employee benefits for cost-effective, harmonized programs.