Captive insurers keep growing even as commercial insurance markets soften, a sign that more companies are looking at them as long-term risk-management tools rather than temporary responses to rising premiums.

The spring edition of Artex Risk Solutions’ Alternative View report found that more than 7,000 captives now operate worldwide, generating more than $80 billion in annual premiums. They are now being used for a wider range of risks and goals than in the past, too.

Bermuda captives wrote $31 billion in gross premiums in 2023, with 71 per cent of risk originating in North America and Bermuda, according to the Bermuda Monetary Authority.

“The fact that the US has a competitively priced commercial insurance market thriving alongside a growing number of captives has put to rest the outdated stereotype that captives exist only to address pricing and capacity challenges in the primary insurance market,” the Artex report said.

Among the fastest-growing uses is medical stop-loss coverage, where self-insured employers use captives to manage the cost of large healthcare claims. The report noted that rising claims costs and reduced reinsurance capacity have increased interest in this use.

Companies are also using captives to support employee benefits and wellness initiatives. In some cases, retained captive capital is being used to fund programmes to improve employee health and reduce long-term claims costs.

The report also pointed to a growing interest in parametric insurance, which pays out when predefined triggers are met. Captives are increasingly being used to address risks ranging from natural catastrophes and supply-chain disruptions to cyber incidents and temporary housing needs after disasters.

There is also a growing interest in more sophisticated captive structures, including multiline, multiyear programmes designed to manage risks that could affect several coverage areas simultaneously.

Mike Matthews, commercial director at Artex Risk Solutions EMEA, said: “We’re seeing greater interest in this programme approach from large, sophisticated captives at multiple locations.

“The multiline, multiyear structure allows organisations to smooth out volatility across a three to five-year period while mitigating the risk that a single systemic event would erode capital across several coverage lines.”

Cyber-risk is also seeing more captive activity as companies look for new ways to manage digital exposures.

At the same time, advances in artificial intelligence and data analytics are changing how captives operate. According to Artex, captive owners are using AI to analyse large volumes of claims data to help them improve their businesses.

The result is a shift in how companies view captive insurers.

At the Bermuda Captive Conference earlier this month, Mike Meehan, principal of Milliman, the global independent actuarial and consulting firm, explained: “It’s a robust market. [There are] a lot of formations taking place, so we are seeing a lot of companies enter the captive market and determine they want to take control of their risk financing.

“But in addition to that, we are seeing a lot of activity with existing captives growing their programmes.

“So, whereas they may have initially started their captive to solve a very specific problem or fulfil a need, as they get more comfortable with the captive model, they start to take another look at maybe a strategic of their captive, what else can they be doing with their captive; what other coverages can they put in there; what other risks and exposures can they finance through that captive.”