Marsh Captives: Key Data and Trends Sneak Peek

Marsh Captive Solutions, managing 1,588 captives (1,900 entities) in 2023 with a gross premium exceeding $73 billion, has released a sneak peek data update. The update states that Marsh has added nearly 500 new captives in the past four years. According to Business Insurance, there are a total of 6,181 captives worldwide in 2023. The following insights and analysis are derived from 2023 data on Marsh-managed captives.

Domicile Trends

Captive premiums in the Asia Pacific region grew by 4 percent, although the growth rate moderated compared to previous years due to three main factors.

1. Easing of hard market conditions in traditional markets
2. Stabilization of property values after three years of significant increases
3. Unchanged retention levels of captives from the previous year, following significant increases in prior years due to the hard market

Canada emerged as one of the fastest-growing regions globally, with captive premiums increasing by 78 percent in 2023. This growth is primarily driven by the province of Alberta, which opened to captive formations less than 2 years ago.

The United Kingdom (Guernsey) and Europe also saw substantial growth, with premiums increasing by an average of 15 percent in 2023. Key growth domiciles include Dublin, Guernsey, Malta, and Luxembourg. Much of this growth is fueled by a rising interest in protected cell companies and the European Union's proportional approach to insurance solvency regulation that scales to the size of captives.

Premium growth across various regions includes the following.

• United States: 7 percent growth
• Canada: 78 percent growth
• United Kingdom & Europe: 15 percent growth
• Asia Pacific: 4 percent growth
• Middle East: 9 percent growth
• Islands: 9 percent growth

Coverage Trends

Traditional property and casualty coverages remain dominant, comprising 42 percent of premiums managed by Marsh in 2023. Property risks saw a 29 percent premium increase, and casualty premiums, which mainly stem from auto, general liability, workers compensation/employer's liability, excess liability, product recall, and medical malpractice, rose by 14 percent.

Employee benefits have also become a significant segment, representing about 20 percent of Marsh's global captive portfolio. There is also a notable trend of captives funding medical stop loss and international employee benefit programs.

Notable premium increases in 2023 include the following.

• Property: +29 percent
• Casualty: +14 percent
• Medical Stop Loss: +37 percent
• Cyber Liability: +17 percent
• Directors & Officers (D&O): +49 percent

Captive Utilization in Reinsurance

Marsh captives access reinsurance markets, with reinsurance premiums totaling $11 billion. The top five industries represent over half of this premium.

• Financial Institutions: +$25 billion
• Communications, Media & Technology: +$8 billion
• Health Care: +$7 billion
• Retail/Wholesale: ~$5 billion
• Automotive: ~$3 billion

Industry Trends

The top five industries with significant captive utilization and growth in premiums include financial institutions; communications, media and technology; health care; retail/wholesale; and automotive sectors.

The communications, media, and technology (CMT) sector leads in the number of lines of coverage written globally. Notably, 20 percent of CMT captives own more than one captive entity, with many covering property, cyber, umbrella/excess, extended warranties, and medical stop loss.

In the healthcare sector, about two-thirds of Marsh's healthcare captives are single-parent entities, nearly a fifth are cell captives, and 13 percent are risk retention groups. Many companies in these industries tend to own multiple captives.

In Asia, it's challenging to pinpoint specific leading industries for captive coverage, as most captives are established by large conglomerates with diverse businesses. However, there is an increasing demand for captives among businesses in the energy and power sector due to capacity constraints in the retail insurance market. Interest in protected cell captives (PCC) is also growing, with many companies using cells as a precursor to establishing their own captives.

Limits Across Lines of Business

Marsh's analysis reveals that more than 85 percent of Marsh-managed captives globally insuring property risks write limits exceeding $10 million. For financial lines, around 65 percent of captives funding D&O liability write limits above $10 million. Cyber liability limits vary widely across the captive portfolio.

Additionally, 55 percent of Marsh-managed captives that write automobile liability offer limits between $1 million and $2 million, while 45 percent that insure general liability write limits below $5 million.