1. Activity is increasing as the captive landscape shifts

The captive insurance market continues to grow, with an estimated 90% of Fortune 500 and S&P 500 companies now using these enterprise risk management vehicles.^* In the UK and Europe, their use is commonplace, and captives are growing rapidly in the Middle East, particularly in Saudi Arabia and the UAE. Interest is also increasing in Asia, although adoption remains at an earlier stage. 

The appeal for corporates is clear. Well-managed captives not only help companies manage higher insurance costs but also offer additional benefits by retaining premiums that would otherwise be paid to external insurers. For several years, the insurance market has hardened with higher rates across almost all lines, tighter underwriting standards and reduced capacity, making risk transfer more expensive. While rates have now plateaued, they remain elevated due to pandemic-induced price increases, supply chain disruptions, natural disasters and inflation. 

These dynamics are leading to dormant captives being reactivated, large captives writing more business and some large companies using captives for as much as half of their insurance.* And the breadth of risk captives cover continues to expand.

Provided there is confidence that the risk will not exceed claims within a calendar year, the retained premium becomes surplus and may remain in the captive – potentially to be returned to the parent as a dividend.  

At the same time, opportunities to establish captives are increasing. Historically, captives were set up in offshore centres such as the Crown Dependencies, Bermuda and the Cayman Islands, where robust ecosystems of lawyers, accountants and brokers have developed. Many of these offshore jurisdictions also offered tax advantages. However, these benefits are diminishing due to Base Erosion and Profit Shifting (BEPS) measures, which effectively impose a minimum tax rate of 15% for large multinationals in most jurisdictions.

^{* Captive International, 2021}

^{* Financial Times, 2024}