Traditional property and casualty coverages account for the largest segment of captive premium, at 36%. Other coverages that Marsh-managed captives fund are: life insurance, 30%; employee benefits, 19%; and financial lines, 15%.
Interest in non-traditional lines of coverage also continues to grow. On the employee benefit side, medical stop-loss premiums in captives were up 32%, while in voluntary benefits it increased 39%. On the casualty side, directors and officers (D&O) liability increased 100%. Cyber premiums in captives have risen 57%, and notably the number of Marsh-managed captives writing cyber has increased by more than 75%.
During the hard property market of recent years, Marsh captives have experienced a 7% premium increase just in North America. Fronted reinsurance, quota shares, excess, and captives have been participating in property layers in new ways.
Casualty coverage, long a backbone of captives is also undergoing an evolution. Many captive owners want to know how to become smarter about what they are financing. There has been a lot of growth in the casualty space, with workers’ compensation remaining the biggest segment.
The challenging market has caused some captive owners to ask how they can change their approach to get different results from the past. This is manifesting in such things as tie-ins to employee benefits, collaboration with HR, and growth and expansion of the captive footprint.
Third-party business had historically represented a small fraction of captive premium, but is now 27% of Marsh-managed captive premium. More captive owners are interested in capturing underwriting profit and investment income on cash flow associated with insuring third-party risks. In addition to diversifying the captive’s risk portfolio, third-party coverages — such as pet insurance, umbrella liability, automobile, and extended warranties — can enhance a captive’s profitability.
Putting such a diverse set of risk categories into the captive helps to spread volatility across multiple coverage lines, and can lower volatility in the captive itself.