A strategic approach to market challenges

Captives are being used as originally intended: to take control over specialised risks and realise a more sustainable approach to insurance, Jeremy Colombik of MSI tells Captive International.

As the commercial insurance market faces significant challenges, captives are stepping in to fill the void, providing companies with essential risk management tools that were previously difficult to obtain.

“An astute captive management team can make a significant difference.” Jeremy Colombik

“The captive insurance market is experiencing rapid growth, a trend that’s increasingly evident as businesses seek alternatives to traditional commercial insurance solutions,” says Jeremy Colombik, managing partner at Management Services International (MSI). “Captives are now seeing unprecedented demand, driven by factors such as high commercial premiums, market volatility, and the limitations of traditional coverage.”

MSI has been a key player in the field for over 15 years, and recognises that captives provide tailored risk solutions, which allow companies to handle specific risks in ways the commercial market simply cannot accommodate.

Colombik believes that the appeal of captives lies in their flexibility and ability to adapt to unique risks that standard commercial policies may exclude or underinsure and that captives address these gaps, allowing firms to gain control over their risk profile and safeguard against losses that could otherwise be devastating.

A primary advantage of captives is the ability to retain underwriting profits, which strengthens a company’s financial position. By choosing to insure certain risks through a captive, a company reduces its reliance on the traditional market and benefits from stabilised or even reduced premiums over time. Colombik points out that companies are now seeing captives as strategic assets rather than merely cost-saving tools. When captives are well-managed, they can contribute to an organisation’s balance sheet, building reserves and boosting the bottom line.

“While traditional insurance markets continue to struggle with heavy losses, the captive market has become increasingly attractive to companies with a more sophisticated approach to risk,” says Colombik. “Many commercial carriers are withdrawing from certain coverages or pricing them at levels that many companies find prohibitive.”

As a result, carriers are either raising rates substantially or cutting back on the availability of key policies, pushing companies toward captives to protect against these risks more cost-effectively.

Consolidating risk strategies

The current trend in the captive market isn’t about replacing traditional insurance but blending it strategically. Colombik advises businesses to work with a strong captive management team that can assess which risks should remain with the captive and which should be transferred to the commercial or reinsurance markets.

“Captives have filled an essential role by absorbing lower layers of risk while leaving more complex exposures to the traditional carriers,” said Colombik. “As captives become more integrated into companies’ risk strategies, this blended approach allows for smoother, more comprehensive coverage without overburdening the captive’s reserves.”

One of MSI’s key goals is to educate clients on how captives function and the strategic benefits they offer. This goes beyond simply creating a policy: it’s about building a tailored, resilient solution. For example, when onboarding clients, MSI’s team identifies potential exposures, some of which the clients may not have initially considered. By proactively managing these risks, companies can take on specific exposures that align with their financial goals and gain a competitive edge through enhanced control.

“An astute captive management team can make a significant difference,” said Colombik. “Often, clients enter the market unaware of the full range of capabilities captives offer.

“MSI’s professionals delve into the specific needs of each client, exploring areas where captive insurance could help reduce the overall cost of risk. With the right knowledge and expertise, a captive can transform a company’s approach to risk management, supporting more informed and confident decisions.”

Captive insurance has a long history, particularly in the US, where legislative developments have supported its growth, noted Colombik. “States such as Vermont have led the way, creating regulatory environments that are conducive to the formation and management of captives.

“Such regulatory advancements have made it easier for businesses to establish captives and understand the framework that supports their long-term success,” he said.

The evolving landscape

Captives have traditionally provided alternative risk solutions for well-defined areas, but new developments in the insurance industry are now influencing their use. As Colombik explains, technologies such as artificial intelligence and parametric insurance, which are gaining traction in the commercial market, are also finding applications in captives.

“By adopting these technologies, captives are enhancing their ability to predict and respond to potential claims, leading to better management of reserves and increased claims control,” he said.

Creating a successful captive programme requires a strategic approach to retaining and transferring risk. A knowledgeable team, skilled in structuring captives, can position a company for long-term success. A good programme manager ensures adaptation to evolving risk landscapes and regulatory requirements.

Colombik highlights the importance of choosing a qualified captive manager to ensure the programme meets the organisation’s unique needs, cautioning against opting for lower-cost options that may not provide the same value over time.

One of the major financial benefits of captives is the potential to share in underwriting profits. Many clients appreciate the ability to stabilise premiums over time and leverage actuarial data to manage claims, said Colombik. If a company sees a low volume of claims, it may choose to keep premiums stable while expanding coverage or increasing limits. This approach provides a level of flexibility and control that the traditional market rarely offers.

He added that captives offer smaller deductibles for specific operating units, creating a tailored solution that reduces overall operating costs, improves cash flow, and increases capacity. Companies have more freedom in how they use their capital reserves, making captives a dynamic tool for optimising financial performance.

With a growing understanding of the strategic benefits captives provide, companies are increasingly looking to captives—not only for risk management but also to improve overall financial stability.

“As this trend continues, the captive market is likely to remain a pivotal component of the risk landscape, supporting businesses as they navigate a dynamic insurance environment that shows no signs of slowing down,” he concluded.

Jeremy Colombik is managing partner at Management Services International. He can be contacted at: jeremy@themsicorp.com

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