US captive insurers are outperforming the commercial sector in most key financial measures, according to rating agency AM Best.
This report, ‘Group Captives Feeling the Squeeze, Single Parent Captives Winning the Race’, added that the captives it rates have outperformed despite a general increase in the level of loss and loss-adjustment expenses (LAE) for captives in 2014, which saw a 12-point deterioration in the overall loss and LAE expense ratio from 2013.
It found that the underwriting expense ratio improved for the second consecutive year in 2014 and surpassed the previous four years, while the five-year average combined ratio for the captive composite of 79.6 percent (before policyholder dividends) was also more favourable than the commercial insurance composite’s average of 102.7 percent.
Additionally, the rating agency added that single parent captives have not only outperformed key metrics against the AM Best commercial insurance composite, but also the captive composite.
“Overall, AM Best believes that the values captives add in terms of their strategic, operational and financial benefits to their groups or parents remain solid and valid,” said the rating agency.
AM Best, North America