Insurance Marketplace Realities 2025 – Captives

Captive demand continues to be robust, as evidenced by new formations during 2024. As reported during 2023, there is continuing involvement in specialty lines and in the creation of diverse portfolios of risk rather than in a monoline approach.

Data and analytics capabilities are key enablers of change.

• These tools are facilitating advances in quantification of both individual risks and portfolios of risks, including multiple lines of business.
• Captives may be able to cover emerging risks based on advanced analytical capabilities before traditional insurance markets have realized the opportunity to develop their own products.
• We continue to see an increase in the use of analytics to support decision making and to optimize the cost of risk transfer in market negotiations, particularly among captive owners looking to optimize their use of capital and quantify their risk tolerance.

Interest in parametric solutions, especially around climate and environmental risks, remains strong, as clients seek capacity that may not be available in traditional insurance markets.

U.S. domiciles

• Reports of new captive formations during 2024 have remained strong across most U.S. domiciles.
• There is strong demand for excess casualty liability coverage among current and prospective captive sponsors. This is driven by price and capacity constraints in the commercial markets.
• Mature captives with sufficient capital and surplus continue to employ that capacity to manage tightness across all lines of business.
• This is facilitated by analytics to optimize how capital is deployed in the captive program.
• Captives continue to provide access to better priced terrorism through reinsurance markets and government-backed schemes rather than have the protection directly placed in the primary market or embedded in standalone property coverages.

Americas offshore

• The key Atlantic and Caribbean domiciles of Bermuda and the Cayman Islands continue to see growth in the number of new captive insurance licenses issued.
• Through July 2024, there were four new captive licenses issued in Bermuda compared to 16 in the prior full year, while the total number of new licenses issued for all types of insurers was 30. There have been numerous segregated accounts (cells) formed during this period, but statistics for these are not published
• Cayman saw 24 total new licenses issued through June 30, 2024, compared to 40 total licenses issued during 2023. Captives represent most of all the new licenses issued. There continues to be growth in segregated portfolios (cells), portfolio insurance companies (incorporated cells) and members in group captives, for which statistics are also not published.
• Activity continues among insurance companies setting up internal “captive” reinsurers as key elements in their capital management efforts and to access reinsurance more efficiently. From a regulatory perspective these are treated as commercial licenses rather than as captives.
• New activity is still primarily focused on business from North America, but there is a considerable interest globally with these domiciles tending to be favored for captives involved in large and complex global programs. WTW has seen activity from the U.K., Europe, Latin America and Asia.
• Outside of captive business there remains extensive activity relating to the formation of life and annuity reinsurance entities, both in Bermuda and Cayman, for which WTW provides insurance management services.
• Segregated account (cell) business in Bermuda is extremely active at present. The Bermuda Monetary Authority is planning to introduce some amendments to the regulation of this business, so this may have an operational impact in 2025 and beyond.
• WTW manages some Side A D&O business on a funded basis through Meridian Insurance Company Limited, its cell company and, although growth in this business slowed in late 2023, it has seen renewed interest from entities that are in or adjacent to the digital asset space and who are still stressed in commercial markets.
• International employee benefit captives are growing in importance and, aside from the savings they may generate, they also help in creating a greater diversified portfolio of risk, including premium revenue that may technically be considered as being third-party risk.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Contacts

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Peter Carter

Head of Climate Practice &
Head of Captive and Insurance Management Solutions,
WTW

email Email phone +44 20 3124 6300

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Jason Palmer

Regional Head of Captive and Insurance Management Solutions, United States

email Email phone +1 802 264 9555

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Paul Bailie

Regional Head of Captive and Insurance Management Solutions, Atlantic & Caribbean

email Email phone +1 441 707 0692

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