27 June 2013Analysis

Middle market stigma is diminishing – Artex

The stigma against middle market captives is diminishing in the industry but has far from vanished, believes Jeremy Huish, business director at Artex Risk Solutions.

“The market for multi-billion dollar companies forming captives is nearly dried up since most of those players have a captive already,” Huish told Captive International. “With market saturation in the big captive space, how is a domicile, risk manager, actuary, or captive manager able to grow? The answer is evident in the increasing number of middle market captives being formed.”

According to Huish, growth in the middle market is also a by-product of increasing service provider knowledge.

He said: “with more service providers in this space comes a greater knowledge base of the risk management tools for middle market clients, further reducing the stigma of working with small captives.

“Workers compensation, general liability, property, deductibles, excess coverage; all of these risks that have historically been managed by larger captives are used in smaller captive designs, but the numbers are much smaller to reflect the size of business.  New kinds of risks such as medical stop loss are a popular trend as the market is forcing business owners to find a solution.”

Huish concluded: “many domiciles and practitioners do not judge a captive by its size, but whether the captive has the business case and meets appropriate guidelines.  Whether a captive is receiving $1 billion or $1 million in premium, similar needs are present at the formation of the captive.”

He concluded: “many of the captive and self insurance conferences now have break out sections specifically focused on serving middle market needs. These are well attended sessions.  This is a good trend that should continue.”