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10 June 2025news

‘Captive-first’ ethos gains traction in risk financing philosophy

Captive insurance strategies are evolving rapidly, with a noticeable shift towards more sophisticated, embedded approaches in risk management planning, Graham McCarthy, partner – specialty broking, McGill & Partners, told AIRMIC Today.

“Every captive owner will have a unique strategy, but the core question is how embedded the captive is in the broader insurance purchasing process,” McCarthy explained. “Are we thinking about retention through the captive at the outset, or is it an afterthought once a risk has matured?”

This “captive-first” approach, he noted, is gaining traction among sophisticated risk managers who see their captive not merely as a cost-saving tool but as a central pillar of the organisation’s risk financing philosophy. “We have some really good clients who use what we call a captive-first approach – the captive sits at the cornerstone of their risk purchasing philosophy,” he said.

McCarthy pointed to key inflection points in a company’s journey, such as M&A activity or organic expansion, where the strategic role of the captive should be considered early. “Before the asset comes online or the exposure is created, risk managers should be asking: ‘can we retain this risk in the captive? Should we transfer it?’ This front-end thinking is what defines a captive-first methodology.”

McGill & Partners sees strong alignment between this proactive risk retention strategy and the growing use of captive reinsurance. “Where we can really support clients is in structuring reinsurance placements of the captive’s policies. It allows clients to retain risk intelligently and access capacity efficiently.”

In recent years, perceptions of captives have changed dramatically. “There’s definitely a renewed interest,” McCarthy observed. “The complexity of how clients think about captives is far greater than 10 or 20 years ago. Both mature and newer captives are increasingly nimble – they’re locating the advice they need and interacting with the market in a very sophisticated way.”

He credited this evolution in part to the increased availability and use of data. “Data has massively aided this shift. It allows for a deeper analysis of risk, helping captive owners make more informed decisions about retention and transfer strategies.”

European jurisdictions, too, are experiencing a noticeable uptick in captive interest. Countries such as Italy and France are actively revisiting their approach, while the UK awaits the outcome of a Treasury-led consultation. McCarthy noted that this growth is aided by the regulatory stability under Solvency II.

“You could objectively say Europe is well established under Solvency II. Capital drivers for captives are now well understood, and that gives owners the confidence to focus more on strategy,” he explained. “Domicile selection, structuring and long-term positioning of the captive are now becoming top-of-mind issues.”

McCarthy believes this trend reflects a broader shift in the risk environment. “We’re heading into a more complex risk world, not a simpler one. Captives allow businesses to be more responsive, strategic and deliberate in how they manage that complexity.”

As captives move from the periphery to the centre of risk strategy, McCarthy summed it up succinctly: “It’s a really good time for captive owners to ask ‘is the captive the cornerstone of our risk strategy, or are we missing an opportunity to do more?’”

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