2022 will be another bumper year for captives formations: CICA panel

The captives industry has seen almost unprecedented growth in the past two years, largely driven by the hard market in wider commercial lines – and 2022 could again represent a bumper year for the sector.

That was the view of Nancy Gray, Regional Managing Director, Americas, Aon, speaking on a panel discussion called ‘Hot Topics in Captive Insurance’, which took place at the Captive Insurance Companies Association’s (CICA) annual conference, taking place in Tucson this week (March 6-8).

The panel of experienced industry veterans comprised: Joel Chansky, Consulting Actuary, Milliman; Nancy Gray, Regional Managing Director, Americas, Aon; Dave Provost, Deputy Commissioner, Captive Insurance, Vermont Department of Financial Regulation; and Paul Shimomoto, Partner, Goodsill Anderson Quinn & Stifel, who also moderated the session.

Gray said that many companies had become complacent having experienced soft market conditions for so long. This meant that the hard market came as a surprise for many. She said 2020 was a big year for new formations, and 2021 even bigger. But this also only tells part of the story of just how robust the industry has been.

“Yes we saw some big numbers around new captives, but existing captives have also expanded their programmes as well and we have also seen a sharp increase in the use of cells by companies that needed a more rapid response too the hard market – perhaps they struggled on a placement or had gaps in coverage.

“So when you combine everything, the industry really has seen unprecedented growth. I think 2022 will be another big year. We are working with a high number of clients who are considering captives as a risk management tool. They are assessing their risk appetite and retention levels and I expect more formations to come.”

She added that the correct hard market is also unusual because it is not just one sector that is being hit. She said many different lines of business have experienced increased rates, which is driving the move to the use of captives.

Provost agreed that Vermont is also very busy with a mixture of new captives, cells and existing captives being leveraged to do more. “The soft market was so prolonged we were seeing some captives close. But now the market has turned, I think every state is seeing healthy numbers of new formations. It has been a busy time.”