US captives - driven by innovation and risk management needs

As the US captive insurance market heads into the Vermont Captive Insurance Association’s (VCIA) annual conference, industry experts like Anne Marie Towle, chief executive of Global Risk & Captive Solutions at Hylant, are observing key trends and challenges shaping the sector.

One of the primary observations Towle highlights is the persistent and even increasing interest in captives. “We're seeing a tremendous amount of interest, still in captives, people exploring and desiring to set up and establish captives—that interest is not waning at all,” she noted to Captive International. This ongoing enthusiasm is driven by a variety of factors, particularly the challenging property insurance market and rising medical costs for employees.

“With the property market, we're seeing some signs that it might ease slightly, but it is still in a very difficult position for many organizations, and that's driving some interest,” Towle explains. Additionally, the burden of medical costs has led companies to consider captives for medical stop-loss insurance, an area that remains a significant driver of captive formation.

Towle also observes a shift in how captives are perceived and utilized within broader risk management frameworks. “Attitudes towards captives have been evolving, and it's now increasingly being seen as another tool in the risk management box that might have previously been overlooked,” she said. This shift is not just about recognizing the utility of captives but also about leveraging them more strategically.

“For those that have had existing captives, we have this tool in the toolbox, and we're able to leverage it in different ways,” Towle continued. Companies are moving beyond traditional uses like deductible reimbursements and are exploring more complex structures involving fronting and reinsurance capacity.

This approach reflects a deeper integration of captives into overall risk management strategies, making them central to decision-making processes.

Despite some signs of easing in certain areas, Towle cautions that the hard market is not yet over. “There are certain lines of coverage, such as workers compensation here in the United States, that never really went into the hard market. But I don't think the hard market has ended,” she stated. While some coverage lines, like general liability, may have seen less severe conditions, Towle anticipates continued increases across various lines heading into 2025. “I think there might be a little bit of easing, but we're still looking at increases,” she added.

Innovation is a recurring theme in Towle’s outlook for the captive market. She views the sector as a hub for creativity and new approaches to risk. “What I enjoy about the captive market is there's always an opportunity for innovation, and innovation certainly drives growth,” she emphasized.

Captives, once considered an alternative, are now becoming mainstream, and this normalisation opens the door for even more innovative uses. Towle described captives as being at "the tip of the spear" in terms of driving new ideas in risk management. She encouraged companies to "manuscript their own policy" and design bespoke solutions to meet their unique challenges.

In conclusion, as the US captive market prepares for the VCIA conference, interest in captives remains robust. With ongoing challenges in the property and healthcare markets, and a hard market that shows no signs of abating completely, captives are increasingly seen as a critical component of risk management. The sector is also at the forefront of innovation, with companies exploring new ways to leverage captives for a broader range of risks. As Towle put it: "When you're really looking at solutions that are extremely difficult or challenging, look to a captive."

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.