1 January 1970Analysis

US captives: further modest gains

In 2012 there was further growth in US captive numbers in most states, although the number of new entrants was somewhat muted by the soft commercial market. A snapshot of domiciles provides an indication of further positive momentum, but numbers have fallen somewhat short of rapid growth. Domiciles that achieved perhaps the most significant gains have been the ‘emerging’ states—those in search of a much soughtafter critical mass—while more mature domiciles have added steady numbers to their bench.

Alabama nearly doubled the number of captives calling the state home in 2012, with 17 captives now present in the state, up from 10 in 2011. Montana and New York also added a good number of captives to boost their existing ranks. Montana gained a further 17 captives over the last 12 months, reaching 85 captives; New York added nine captives to reach 55 in 2012. More modest gains—in percentage terms—were achieved by others. Washington DC gained four captives over the same period, up to 91; Hawaii gained seven, reaching 175, and Vermont added 18 new captives, with a remarkable 590 captives now calling the state home.

On July 1, Florida and Oregon entered the captive space, with both states enacting legislation that means they join a growing number of US states embracing the potential of captive insurance. Seven states have enacted captive legislation over the past five years and it seems possible that others may follow suit. Talking with some regulators it is evident that others are considering a move into the captive space.

Industry sectors employing captives continue to be a real mix, with the likes of healthcare, construction and financial and legal services and energy leading the field, but captive parents span the full gamut of American industries. Many in the sector are talking about the potential of small and medium-sized firms (SMEs), green energy and high-tech industries to contribute to the next wave of captive formations.

In terms of forms of captives, single parent captives continue to dominate the field, making up more than 90 percent of the numbers in most domiciles. Some have developed a niche in micro-captives in recent years, but in terms of quantity and premiums written, the US field is dominated by pure captives. This looks unlikely to change, although SME interest and the success of 831b legislation should mean that they become a real alternative.

Although not stellar, conditions remain fairly stable for the US captive industry and with more choice in terms of domicile and captive type, matters can only improve for those businesses considering, and opting for, the captive route for their insurance needs.

A selection of US state domiciles by premium written

Alabama $11.2 million

Arizona $5.8 billion

District of Columbia $320.8 million

Hawaii $3.2 billion Kentucky $188 million

Louisiana $4.8 million Missouri $1.8 billion

Montana $120.3 million Nevada $184.9 million

New York $1.2 billion South Carolina $3.4 billion

South Dakota $1 million Tennessee $45 million

Utah $442.2 million Vermont $25.6 billion

West Virginia $6.8 million

* Figures are a guide. For full information contact the domiciles directly