Group captives top $6.5bn in US premium with further growth expected
Group captives in the US have experienced rapid growth since their emergence roughly 40 years ago, with newer opportunities expected to continue this trend in the coming years.
That was according to panellists speaking in a session at CICA’s annual conference titled ‘Group captives – from niche to norm.’
David Raymond, a vice president at Travellers, told the audience their organisation now calculates US group captive premium at $6.5 billion, representing 6.5% of the $100bn traditional commercial insurance market.
Since the first formation of Raffles group captive in 1985, Raymond said he now knows of over 90 group captives active just on the casualty side, not considering other property or employee benefits group captives.
“There’s been a tremendous amount of premium growth in the space. I expect this growth to continue at this speed, if not more,” Raymond said.
Also on the panel was Nick Hentges, CEO of group captive specialist Captive Resources. He said his company was projecting group captive premium of $10 billion by 2030, such was the potential for further growth in the space.
At the same time, Hentges said the structure is proving particularly sticky with members, with retention rates within group captives said to be 97-98% at Captive Resources. For the wider market member retention was pegged at somewhere between the high eighties and low nineties.
Hentges suggested much of this growth could come from the untapped potential of medical stop-loss and employee benefits group captives.
On the casualty group captive side, Hentges’ firm estimates a total potential market of 70,000 members, of which Captive Resources services 6,500.
However, for medical stop-loss, the firm estimates a total potential market of 200,000 clients, with Captive Resources servicing around 10,000 members.
“There is a tremendous amount of headroom in the employee benefits, medical stop-loss space,” he said. “And so we’ve jumped into that in a big way. We are going to continue to try and grow casualty, but medical stop-loss has become a real target for us.”
For companies participating in the model, the appeal can go beyond pricing or market access, as panellist Mark Grothe explained.
Grothe is a risk manager at PKG Contracting, which has been in a group captive for the last three years. He said that joining a group captive had changed how his company approaches safety and risk management.
In particular, he said the company values the opportunity to collaborate with other captive members facing similar risks.
“We’re able to align ourselves with like-minded companies that take safety at the premium, and we’re able to utilise that collective as a group as a sounding board to bounce ideas off, look into innovations.” he said.
That collaboration allows companies to share safety practices and risk management strategies rather than reinventing them independently.
“It’s finding better solutions as far as what we can do to manage our claims, eliminate and manage injuries or accidents that happen,” he said.
“We all have the same exact drive, which is to eliminate all that and have the best possible outcome. That outcome can be measured one in the health and welfare of our employees, and two in the bottom dollar.”
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
