Driven by greater interest in and awareness of their potential value among C-suite executives and others, the number of organizations using captive insurers continues to grow. And, according to Marsh’s 2019 Captive Landscape report, so do the ways in which organizations use them. Three areas where we are seeing particularly strong growth: benefits, third parties, and cyber.
Benefits Coverage Rising
Captive participation in multinational benefits has grown 243% over the past five years, according to Marsh’s report. Over the same period, US employee benefits written through Marsh captives increased by 36%, and medical stop-loss by 25%.
One reason behind this trend is that human resources departments now appreciate a captive’s ability to efficiently fund employee benefits programs, which can help attract and retain diverse talent. Of course, interest extends beyond HR managers as benefits represent a considerable expense. Globally, medical benefit costs rose 9.5% in 2017 and are forecast to grow 9.1% for 2018.
As they increase benefits coverage, many captives are also innovating. For example, many captives offer benefits coverage for same-sex domestic partners and for HIV and infertility treatments.
Potential Profits in Third-Party Liability Coverage
CFOs are also increasingly recognizing the benefits of captives, including to potentially act as profit centers by underwriting extended warranties and other third-party risks. Over the past five years, the number of Marsh-managed captives writing third-party coverages has increased 62%.
Used in this way, captives can help businesses retain customers and/or strengthen supplier relationships while generating revenue. Captive-funded loss control programs can also improve productivity.
In 2018, 22% of Marsh-managed captives globally — with a value of $18.7 billion in premium — wrote some form of third-party coverage. Over the past five years, the number of captives offering extended warranties grew by 22%, representing more than $3 billion of net premiums.
Other growing third-party coverages include auto liability, which generated more than $1.2 billion of net premiums for Marsh captives in 2018, and independent contractor/customer risks, which increased 138% in five years and generated more than $162 million in net premiums in 2018.
As would be expected given the ever-increasing cyber risks businesses face, the number of captives writing cyber liability increased 95% over the last five years, including a 15% increase from 2017 to 2018. Like benefits and third-party liability, this growth is driven in part by interest from key stakeholders—in this case, chief information and chief technology officers. But there are other factors too:
As captives evolve with their parent organizations’ needs, the many structural options they offer mean they can help deliver financial solutions that maximize value while also helping C-suite executives and other stakeholders meet several important strategic goals.
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title.fr_ca: Directeur des Ventes, Amériques
shortbio: Mike is a Managing Director in the Captive Advisory Group and resides in Marsh’s Norwalk, Connecticut office. Mike assists clients in the U.S. and globally with the feasibility and organization of single parent captives, as well as risk retention groups and Rent-A-Captives.
title: Americas Sales leader
Mike is a Managing Director in the Captive Advisory Group and resides in Marsh’s Norwalk, Connecticut office. Mike assists clients in the U.S. and globally with the feasibility and organization of single parent captives, as well as risk retention groups and Rent-A-Captives. Mike also participates in captive strategic reviews for clients that already have captives. Mike is frequently involved with reviewing merger and acquisition transactions where there are one or more captive subsidiaries and advises on various issues. He handles a wide range of consulting services surrounding various captive issues and concerns, such as capitalization levels, new coverages, tax concepts, captive investment opportunities, and cost savings. Mike’s industry focus areas include privately held companies, financial institutions, retail, manufacturing, and power and utilities. Mike speaks at various industry seminars and conferences, as well as conducts training classes within the Marsh Captive Solutions Group.
Prior to joining Marsh, Mike was a senior tax associate with KPMG, LLP, a Big 4 accounting firm. During that time Mike was the primary senior associate responsible for legal and tax consulting work, specifically relating to consulting on tax matters for captive insurance companies and commercial insurance companies.
JD, Western New England College School of Law
Dual BA in Criminology and Psychology, University of Connecticut (Storrs, Conn.)
shortbio.fr_ca: Mike est un administrateur délégué du groupe-conseil spécialisé dans les captives et est rattaché au bureau de Marsh situé à Norwalk, Connecticut.
shorttitle: Americas Sales leader