The future of captive insurance: a decade of complexity, innovation and climate resilience

In the first of two articles based on an online panel discussion, Captive International asks what captives will look like in the year 2035.

In a rapidly changing world defined by climate disruption, artificial intelligence (AI), and geopolitical uncertainty, the next decade presents a critical turning point for the captive insurance industry. At the forefront of this transformation are forward-thinking industry leaders and regulators, actively reimagining how captives can not only survive – but thrive – amid volatility.

Captive International hosted a panel discussion on this topic that started by posing a critical question: how will captives evolve in response to today’s most urgent global risks – could the role and structure of captive insurance could look dramatically different by 2035?

Gathering perspectives from regulators, consultants, actuaries and risk professionals, the discussion offered deep insights into how captives will adapt in the coming years – and what organisations must do to prepare.

Converging risks: the era of complexity

Nate Reznicek, president of Captives.insure, was among the first to address the profound shifts in the global risk landscape.

“Climate volatility, AI disruption and geopolitical fragmentation are all projected to intensify and interact over the next decade,” said Reznicek. “This will largely create an even more complex threat landscape for enterprises.”

Rather than viewing each of these risks in isolation, Reznicek stressed the importance of recognising their convergence. As organisations confront secondary perils and emerging AI risks, captives must move beyond their traditional function and position themselves as central risk management tools.

“Captives will be at the spearhead for how businesses manage and transfer risk from a financial perspective,” he added.

”Increased risk leads to hardening insurance markets and that leads to captive formation.”

Technology and creativity: catalysts for transformation

While emerging risks present serious challenges, Rob Walling, principal and consulting actuary at Pinnacle Actuarial Resources, highlighted the transformative role of technology in the sector.

“Technology innovations are affecting every aspect of an insurance company, and captives are not exempt,” said Walling. “Underwriting, claims and actuarial processes are all being reshaped by AI and machine learning.”

Walling believes that this technological evolution is not only improving decision-making but also fuelling a new wave of creativity in risk management.

“Technology and creativity are hand in glove, and will drive the next decade,” he said.

As the world changes, so too will the types of coverages required. Captives must be prepared to offer bespoke solutions for new industries and novel exposures.

"Technology innovations are affecting every aspect of an insurance company, and captives are not exempt"

Holistic risk management: breaking down silos

Nancy Gray, regional managing director at Aon, underscored the need for a comprehensive and enterprise-wide approach to captive utilisation.

“Organisations should really view their captives as a risk management tool to manage their total cost of risk,” Gray noted. “The captive can be involved in both risk retention and transfer, depending on the organisation’s appetite.”

She urged companies to think beyond traditional property and casualty risks.

“It’s important to view captives holistically. There are opportunities for parametric coverages, medical stop-loss and international employee benefits,” she said. “We’re seeing a lot more of that.

As captives increasingly address non-traditional risks, they become embedded across the entire organisational strategy – rather than operating in isolation.

The regulator’s view: innovation in Vermont

Representing one of the world’s most prominent domiciles for captive insurance, Brittany Nevins, captive insurance economic development director for the State of Vermont, spoke to the unique role regulators can play in facilitating innovation.

“It’s hard to predict exactly how risks will evolve, but increased volatility always leads to increased risk – which leads to hardening insurance markets, and that leads to captive formation,” said Nevins.

She noted that climate change has already spurred growth in captive structures.

“We’ve seen quite a few captives formed in the real estate industry in Vermont as a result of climate change,” she explained. “We’re also seeing innovative captives being formed for a variety of societal challenges where there’s a gap in coverage.”

However, she warned that availability of funding and support – such as federal grants – will determine how much of this need translates into actual captive formations.

Captives and climate resilience: a growing imperative

As climate-related risks become more frequent and severe, captives are increasingly stepping in to fill the void left by traditional insurers. Nancy Gray provided examples of how organisations are using captives to plug critical coverage gaps.

“Markets have been unwilling to cover some climate risks,” she explained. “We’ve worked with clients to write perils like wildfire into their captives – coverages that were being carved out of their property programmes.”

Some organisations have even created dedicated cells to isolate and manage climate risks independently. This flexibility demonstrates captives’ capacity to act as custom-built resilience tools.\

Reznicek further contextualised this trend with alarming data. “Global insured catastrophe losses have exceeded $100 billion for the past five years in a row,” he said. “With climate action now a top concern globally, captives are integrating parametric layers, financing mitigation and adaptation and offering engineering feedback loops to create smarter, more responsive coverages.”

He added that integration with capital markets is enabling captives to create tailored, risk-sensitive products aligned with the specific needs of shareholders.

Innovation in action: from surplus to sustainability

According to Nevins, the structure of captive insurance inherently incentivises long-term thinking, particularly in the face of climate change.

“There is a built-in incentive for risk management and resilience planning,” she said. “Captives have direct access to data, and any surplus generated can be strategically reinvested.”

She cited Vermont-based captives using surplus to fund resilience efforts – demonstrating how captives can serve not only as financial vehicles, but also as instruments of sustainability.

Community solutions: captives at the grass roots

Finally, Walling shared innovative approaches emerging from the grass roots level – where captives are being used to protect entire communities.

“We’re seeing homeowners’ associations form association captives to insure residents,” Walling explained. “They’re including the cost of wildfire or windstorm protection in the premium – and then fortifying the entire neighbourhood.”

These efforts may include satellite monitoring, vegetation control or infrastructure investment. In doing so, captives move beyond risk transfer and become agents of real-world risk reduction.

“It’s creating a situation where you’re no longer only protecting your property – you’re protecting a whole community,” he said. “And it’s making a difference.”

A decade of opportunity

As we look ahead to 2035, one thing is clear: captives are poised to become more critical, more agile and more innovative than ever before. Whether driven by climate volatility, technological disruption or the fragility of global politics, the pressures facing organisations will demand dynamic, integrated risk solutions.

As the panellists made clear, captives are uniquely equipped to rise to this challenge. With the right strategic focus, captives won’t just manage risk in the coming decade – they will redefine it.

“Increased volatility is here to stay,” said Nevins. “But so is the opportunity for captives to step up in ways we’ve never seen before.”

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