Captives to Remain Viable as Market Softens: RIMS Panel

As commercial property insurance rates moderate, the value and relevance of captive insurance companies isn’t expected to fade away.

A panel of experts discussed the state and evolution of the captive sphere during a presentation at the RIMS RiskWorld conference earlier this month. Those experts seemed to agree: While hard markets often act as a catalyst, the decision to form or expand a captive is not just a short-term reaction.

“The long-term rationale is much more strategic,” said Ariana Scherzinger, moderator of the panel and group head of captives for Zurich Insurance.

Marsh defines captive insurance as a risk financing mechanism in which a company insures itself against future losses. Essentially, an insured brings its risk in-house in a captive insurance arrangement by creating a licensed company that provides insurance to its parent organization or affiliates.

Slides shown during the presentation showed that 195 new captives were launched in North America in 2024. That brought the total count to 2,687 at the end of the year. And while 36% of the continent’s captives are older than a decade, nearly a quarter of them are less than three years old, according to numbers from Captive Intelligence Data Hub.

“Captives are really, really, really alive and well,” said Michael Serricchio, managing director and America’s consulting leader for Marsh Captive Solutions. Marsh alone has formed more than 600 captives in the last five years — 92 of which formed in 2024.

Serricchio said the record growth in captives in the last few years can be attributed to the hard property insurance market, natural catastrophes, global uncertainty, and political unrest. These issues present an opportunity for clients to understand how they can take control of their own risk, save premium dollars and create governance, he added.

But how could captives be affected by improving rates? Marsh data shows that global commercial insurance rates fell 3% on average in the first quarter of 2025 — marking the third consecutive quarterly decrease after seven years of rising rates. Property rates declined 6% globally in Q1 and 9% in the U.S.

Serricchio shared that property tends to be the top coverage line in most captives. Even as the market softens, companies that have been using captives aren’t going to stop putting property into them, he said.

“They don’t want to be at the mercy of an insurance carrier,” he said. “They don’t want to take their retentions way back down and then play the game year after year after year.”

Scherzinger told Insurance Journal after the event that while property rates may have moderated in some regions, the underlying exposures haven’t. She said that at its core, a captive allows organizations to retain and control how they manage risks.

That means more than just cost savings — it’s about gaining transparency on loss performance, she said, and aligning risk and capital and ultimately building resilience. Hard markets may open the door to the captive space, Scherzinger explained, but what keeps companies inside is the long-term value of control, efficiency, insight and increase of strategic options.

“When risks are well-managed, captives create an opportunity to retain underwriting profits and investment income,” she said. “That’s a compelling proposition, especially for organizations with a strong risk management culture.”

While overall global commercial insurance rates have dropped, Marsh reported that casualty rates increased 4% globally during the first quarter of 2025, driven by an 8% increase in U.S. casualty rates due “largely to the frequency and severity of casualty claims, many of which are characterized by large jury awards.”

Marsh reported that insurer capacity for U.S. casualty remained constricted in the first quarter. In a follow-up interview, Serricchio said U.S. excess liability rates increased 16% on average year over year in the first quarter 2025. As nuclear verdicts and social inflation drive these rates up, Serricchio said captive owners will take portions of their excess liability tower layers and put them into their captive for premium savings.

“That’s one of the things that you saw five or six years ago, and you’re going to see a reemergence of that,” he said.

Scherzinger stressed that with captives, collaboration is vital.

“What resonated with me as moderator — and I think with the audience — is that no captive would succeed in a silo,” Scherzinger said. “Whether it’s engaging early with the domicile, aligning with a fronting partner who truly understands your needs, or working cross-functionally within your own organization, collaboration drives results.”

She continued: “This is especially true when captives are used for new or complex risks. The alignment of risk, finance, legal, tax and operations is what turns a captive from a compliance-driven entity into a strategic powerhouse.”

Topics Pricing Trends

Was this article valuable?