North Carolina’s captive boom gathers pace
North Carolina’s captive insurance sector is continuing to build momentum, with growing interest from organisations seeking greater control over their risk financing and insurance strategies. According to Joe Rosenberger (pictured), chief captive analyst at the North Carolina Department of Insurance, demand is being driven by a diverse range of industries, while technological change and emerging risks are reshaping the role captives play within corporate risk management.
Rosenberger says North Carolina has experienced “strong growth in captive formations in recent years”, with activity spanning healthcare, construction, transportation, manufacturing, financial services and insurance-related businesses. Despite the diversity of applicants, he identifies a clear underlying trend.
“One common theme is that organisations want more control over their insurance programmes,” he explains. “They are looking for ways to manage costs, fill gaps in coverage, access reinsurance, and create coverage that is better tailored to their actual risk.”
Rather than serving as a contingency measure, captives are increasingly becoming central to corporate insurance strategies. “For many applicants, the captive is no longer viewed as a backup option; it is becoming a core part of their overall risk management strategy,” Rosenberger says.
The expansion of cell captive structures is playing an important role in widening access to the captive market, particularly for smaller organisations. Rosenberger notes that flexible structures and lower capital requirements are encouraging participation from small and medium-sized businesses that may previously have considered captive ownership beyond their reach.
“Cell captives are attractive because they give businesses a more efficient way to enter the captive market,” he says. “They can offer lower start-up costs, shared service provider expenses, and a quicker path to implementation compared to forming a standalone captive.”
North Carolina’s legislative framework provides additional flexibility through multiple cell structures. “We allow different types of cells, including incorporated, unincorporated, LLC and series cells,” Rosenberger explains. “This flexibility gives owners and their advisers the ability to choose the structure that best fits the risk they are trying to manage.”
Looking ahead, he expects cell captives to remain an important feature of the market. While some businesses may eventually establish standalone captives as their programmes mature, others are likely to continue using cells to isolate particular risks, develop new coverage programmes or trial innovative risk financing strategies.
Emerging risks are also driving captive innovation. As organisations confront evolving exposures such as cyber threats, artificial intelligence, supply chain disruption and telehealth, captives are providing greater flexibility than traditional insurance markets.
“Captives are well suited for emerging risks because they are flexible,” Rosenberger says. “They allow businesses to design coverage around their own exposures rather than relying only on what is available in the traditional market.”
He points to growing interest in cyber, business interruption, privacy risks and AI-related exposures, noting that conventional insurers often face capacity constraints or impose deductibles, exclusions and pricing that fail to meet clients’ needs.
“Cyber is a good example of an evolving risk,” he says. “Some companies are using captives to fund deductibles, participate in quota-share arrangements, or support excess layers.”
Healthcare is another area where captive innovation continues to accelerate. Rosenberger highlights medical stop-loss, telehealth and AI-driven diagnostics as areas where captive programmes are evolving to address changing operational risks. Ultimately, he believes innovation is being driven by practical necessity. “Often, the biggest innovation stems from businesses trying to solve a specific problem that the commercial market is not fully addressing.”
Although insurance market conditions have softened in certain classes, Rosenberger stresses that captives are generally being used alongside, rather than instead of, traditional insurance.
“Most organisations are not using captives to replace the traditional market entirely,” he says. “Instead, they are using captives as a complement alongside commercial insurance.”
Many organisations continue to purchase commercial cover for catastrophic risks while using captives to finance predictable losses, deductibles or difficult-to-place exposures. Areas where businesses are increasingly retaining risk include property deductibles, cyber, business interruption, medical stop-loss, tenant liability, subcontractor default and selected excess liability risks.
“For companies with strong loss control and good claims experience, a captive can give them the ability to take more risk in a disciplined way while also potentially capturing underwriting profit over time,” Rosenberger adds.
North Carolina’s regulatory approach has also contributed to its appeal as a captive domicile. Rosenberger says communication between regulators and captive owners remains fundamental throughout the licensing process.
“We want to understand what the captive owner is trying to accomplish, what risks are being insured, how the programme is structured, and how the captive will be supported from a capital and operational standpoint,” he explains.
Rather than applying a uniform approach, the Department evaluates each captive individually, recognising that programmes differ significantly depending on the risks being insured.
“Our goal is to be flexible and responsive, but also prudent,” Rosenberger says. “Innovative programmes are supported when they are backed by sound underwriting, appropriate capital, actuarial support, strong governance and clear documentation.”
Data analytics is becoming another defining feature of modern captive management. Owners are making greater use of claims information, operational data, safety performance and exposure analysis to improve underwriting, pricing and capital allocation.
“Interpreting this type of data helps owners make better decisions about pricing, retentions, coverage terms and capital needs,” Rosenberger explains. He expects this trend to accelerate as companies invest further in analytics and technology, while acknowledging that artificial intelligence will create both opportunities and new governance, cybersecurity and privacy challenges.
For organisations considering their first captive, Rosenberger cautions against viewing the structure simply as a cost-saving exercise.
“One common misconception is that forming a captive is simply about saving money,” he says. “Cost savings can be part of the benefit, but a captive needs to be built around a real risk management purpose.”
He advises prospective owners to begin with clearly defined objectives, robust loss data and experienced advisers. “A well-prepared application facilitates the regulatory review process and helps establish the captive for long-term success.”
Looking ahead over the next three to five years, Rosenberger expects market conditions, technological advances and the continued evolution of the captive sector to sustain North Carolina’s growth. Challenging lines such as property, healthcare, cyber and excess liability are likely to remain key drivers, while emerging technologies will continue to reshape corporate risk.
“With Commissioner Mike Causey’s strong commitment to the development of North Carolina’s captive industry, our focus will continue to balance flexibility with prudent regulation,” Rosenberger says. “We want to support innovation, but we also want to ensure captive programmes have strong governance, appropriate capital and a clear plan for managing their risks. This balance has been an important part of North Carolina’s growth and maturity as a leading captive domicile.”
Joe Rosenberger is chief captive analyst at the North Carolina Department of Insurance. He can be contacted at: joseph.rosenberger@ncdoi.gov
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