Captives evolve into strategic resilience tools
Captive insurance is increasingly being positioned as a strategic tool for navigating a more interconnected and uncertain risk environment, rather than simply as a mechanism for financing risk. Daniele Zucchi, FERMA board member and chair of the FERMA Captives Committee, says organisations are reassessing how their captives can support resilience as emerging exposures challenge traditional insurance capacity.
“Captives are a highly effective structure to help organisations navigate uncertainties.”
Key Points:
Captives become resilience tools
Data drives forward-looking decisions
Regulation must become more proportional
“Captives are a highly effective structure to help organisations navigate uncertainties,” Zucchi told FERMA Forum Today. “In today’s increasingly interconnected risk landscape, many companies which currently operate a captive are reassessing their strategies and adopting more sophisticated approaches.”
FERMA research shows that captive owners are expanding beyond standard property and liability exposures towards more complex risks where capacity is constrained, including cyber and supply-chain-related business interruption. Airmic’s 2026 captives survey, ‘Captives: a resilient strategy for the future’, similarly found that just over three quarters of captive owners plan to extend their captive to further covers or services, including emerging-risk incubation, data gathering and risk-management bursaries.
“In tandem, more companies are considering entering the captive space, recognising the advantages of the captive’s flexibility as a means of providing greater stability in increasingly choppy waters,” Zucchi said.
That expansion requires discipline. Companies need a clearly defined purpose, a retention strategy aligned with the parent company’s risk appetite, effective reinsurance and strong governance, supported by the regulatory strength and stability of an established captive domicile. “Diversification of risks and lines of business, advanced analytics, and strategic collaboration both across internal functions and outside the organisation are also essential for captives to deliver sustainable value and support organisational objectives,” he added.
Data is key
Data is central to this evolution. Captive owners accumulate substantial loss and exposure data over years of operation, but Zucchi stresses that historical information has limitations when established patterns break down.
“One of the benefits of operating a captive is the wealth of data that users collect over the years of operation,” he said. “However, it is important to recognise that historical data works when patterns hold, but foresight is needed when they break such as when addressing the rapidly evolving dynamics around climate, AI, geopolitics and systemic cyber.”
The captive can combine proprietary data with scenarios and weak signals to stress-test retentions and capital under alternative futures. Zucchi describes this as essentially providing a “‘risk observatory’ for an organisation”.
The resulting analysis can inform decisions on retentions, deductibles, total cost of risk allocation and which lines to add or discontinue. Data can also be shared with functions such as HR and HSE. For captives active in employee benefits, it can support scheme design, performance monitoring and the identification of negative trends.
Emerging risks
Zucchi also sees potential for geopolitical instability, climate-related losses, cyber and supply-chain disruption to migrate into captives. “They are increasingly taking first-loss or quota-share participations on hard-to-place risks, acting as incubators for risks the market cannot yet price effectively,” he said.
A captive can participate in attritional layers while allowing the traditional market to focus on catastrophic peaks and accumulations. These could include nat cat, systemic cyber, cloud concentration, locally admitted paper and claims services, and severe US liability risks.
For smaller and mid-sized European organisations, however, barriers remain. These include minimum capital and fixed running costs, fronting costs and collateral, substance and governance requirements, internal executive buy-in, and access to the skills and data needed to make a captive viable. Zucchi also highlights concerns over regulatory proportionality.
“For some organisations looking to set up a PCC, Malta may not be the most suitable domicile,” he said. He argues that regulators should explore ways to expand the regions in which protected cell companies are permissible and calls for legislation that makes captive structures easier and more attractive.
France provides an example. Its introduction of the “provision pour resilience”, or tax-deductible resilience reserve for captive reinsurers, has made captive structures more viable for some mid-sized and locally focused businesses and acted as a catalyst for captive formations.
Beyond short-term savings
At board level, Zucchi says perceptions must also change. “Many boards and executives view captives as a short-term premium efficiency play and are often assessed on the basis of short-term premium savings,” he said.
Practitioners therefore need to “speak the language of the C-suite”, communicating the wider benefits of captives. “It is imperative that captives are seen as long-term ventures, delivering value over years if not decades,” Zucchi said. “Not just from a purely financial perspective, but more importantly in terms of how they contribute to the overall stability and resilience of the parent in the increasingly interconnected and volatile risk landscape.”
Looking towards the next FERMA Forum, Zucchi calls for a “step change” in how captives are viewed at European level, alongside greater interaction between executives, regulators and supervisory bodies.
He would also like to see continued growth in captive use for prevention, adaptation and transition risks, collective solutions for systemic risks, consistent implementation of Solvency II amendments and “genuine proportionality” across Member States. More effective use of data and technology, he says, could bring further benefits to the industry.
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