DC captive market growing as legislative reforms advance

The District of Columbia’s captive insurance market has continued to expand in 2026, according to the jurisdiction’s regulatory body.

Speaking at the DC Captive Conference this week, Sean O’Donnell (pictured), director of captives at the DC Department of Insurance, Securities and Banking (DISB) told the audience there are now 241 captive entities domiciled there, including 120 protected cells.

There have been 22 captives formed so far in 2026, as the domicile has grown from the 220 captive entities based here at the start of the year.

In addition, O’Donnell said the domicile had four applications pending, alongside further prospective business under discussion.

“The domicile is healthy, and we still, in addition to what we’ve licenced, have a pipeline, so that’s good,” he said.

O’Donnell said commercial insurance pricing had been an important driver of captive formations, particularly during the recent hard property market, although demand in that line had since moderated.

“Going back two or three years, property was huge because of the hard property market,” he said. “We’re not seeing as much of that now, but we’re still seeing a bit of that.”

He explained that businesses continued to consider captives when confronted with substantial increases in commercial insurance costs, prompting them to retain more of their own risk.

The domicile is also seeing interest in emerging risks, including data centres and cannabis, according to O’Donnell.

On cannabis, he said DISB had become more receptive to captive arrangements involving the sector, following the legalisation of cannabis in DC.

“Recently we got an inquiry, and now we can do it,” he said. “It’s a commercial line of business, and if it’s a captive with a good business plan, and it’s a real line of business, we can do that now.”

O’Donnell also pointed to organic growth within existing captives as a contributor to the domicile’s rising gross written premium. This was around $3.7 billion at the end of 2025, having been just under $3 billion at the end of 2024.

Looking at the longer-term expansion of the market, O’Donnell suggested that growing familiarity with captive insurance among risk managers and businesses had been a particularly important factor.

“I think one of the reasons is the visibility of captives,” he said. “There are now a lot more captive conferences, and more domiciles that are forming captives and marketing them.”

As the domicile seeks further growth, a major focus for DISB is a package of proposed amendments to DC’s captive legislation, which was first drafted in 2024 and introduced to the DC Council earlier this year.

Following a hearing in June, O’Donnell said progress had slowed because of the council’s recess and competing priorities during an election year.

However, recent questions from council members have raised hopes that the legislation could advance before the end of 2026.

“Just last week we got questions from the council on it, which I thought was a very positive development,” he said. “So I’m hoping it’s moving again. We’re still hopeful it will be passed by year end.”

The proposed reforms include an expedited licensing process for protected cells and provisions allowing pure captives and cells to make certain business plan changes, including dividend payments, without obtaining prior regulatory approval.

“Things that do require pre-approval now, you can do it without pre-approval as long as your board approves and you notify us within 30 days,” O’Donnell explained.

But he said the proposed changes would not prevent captive owners and managers from continuing to seek regulatory guidance before making decisions.

“Certainly, talk to us in advance if you want to brainstorm about a business plan change,” he said.

“And if you don’t want to use the process, that’s fine. If your board want that pre-approval, we can still do that.”

Another significant provision would allow dormant captives to avoid premium taxes and fees for any full year in which they remain inactive.

O’Donnell said the measure could encourage captive owners to retain dormant structures rather than dissolve them when their immediate insurance needs change.

“We’ve had some captives over the years where the parents stopped using it, but they weren’t sure if they wanted to close it up, and then they found out they had to keep paying premium tax, and they just closed it up,” he said.

“But it would be a benefit they could leave it there dormant if they wanted to try to resurrect it later on, and they wouldn’t have to pay the fees.”

The legislation also seeks to clarify the confidentiality of captive financial information following an increase in Freedom of Information Act requests this year.

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