More companies are establishing captive insurance companies because they want to retain more risk in difficult insurance markets, Marsh LLC executives said Tuesday.
Captive growth has accelerated over the past three years as capacity in the commercial market has become too expensive or hard to come by, they said in a briefing at the Risk & Insurance Management Society Inc.’s Riskworld conference in Atlanta.
Growth has been “off the charts,” as clients want to control their own destiny in challenging insurance markets, said Ellen Charnley, Las Vegas-based CEO of Marsh Captive Solutions, a unit of Marsh LLC.
Marsh added 370 new captives to its portfolio from 2020 to 2022, bringing the number it manages to about 1,900 and premiums under management to $70 billion, Charnley said.
And growth in captivity is still increasing – on a quarterly basis, globally and across industries — although the commercial insurance market is “probably softening in some areas,” Charnley said.
Based on Marsh’s analysis, internal growth has been correlated with increases in insurance rate levels across regions.
“We’re seeing growth in the Asia-Pacific region and in Latin America correlated with insurance (rate hikes) going up in a challenged market, which is unusual because these are regions that were slower to grow over the last 10 or 15 years,” Michael Serricchio said , Norwalk, Connecticut-based CEO of Marsh Captive Solutions.
For example, premiums under Marsh increased by 58% in Asia-Pacific and by 36% in Latin America from 2020 to 2022, Serricchio said. Regions correspond to where captive parent companies are located.
In North America, premiums managed by Marsh increased by 15% between 2020 and 2022.
Growth in North America has mirrored the global insurance price index, said Allan Smith, Phoenix-based customer service leader and senior vice president at Marsh Captive Solutions.
“Even though the rate of acceleration is slowing, it’s still accelerating. There are still challenging markets out there. People are looking for alternative solutions, and prisoners are one of them in the United States,” Smith said.