Chirico: Captives outperform commercial markets

According to Steve Chirico, assistant vice president at A.M. Best, captives outperformed the overall commercial casualty market in 2012. The five-year combined ratio for about 175 captives in A.M. Best’s captive composite was 92.3 at year-end 2012, compared to 103.3 for the commercial casualty market despite tightened margins as property losses rose in 2012.

This trend is driven in part by parent companies, Chirico says, who are working to maximise the use of their captives. He said: “Parent companies are retaining more, writing more and providing other coverages that may or may not be considered insurance.”

Chirico also pointed to increased competition as the number of states passing captive-enabling legislation increases as a positive for the industry. He commented: “Competition is good. It keeps people honest and motivated.”