Bermuda ranks second to Vermont for the number of AM Best-rated captives.

The US Property/Casualty and Captive Insurance Review, released by the credit rating agency, shows that 12.7 per cent of all captives with Best ratings are based in Bermuda. But Vermont was the leading captive domicile by this measure at 16.3 per cent.

The rest of the US is host to 31.2 per cent of Best-rated captives. After Vermont and Bermuda, the District of Columbia came in a distant third at 6.3 per cent.

The report notes: “AM Best’s rated captive domiciles show concentrations in Vermont and Bermuda, each recognised as a global captive domicile leader.”

Captives are insurance companies set up by businesses to insure their own risks. AM Best’s analysis shows that rated captives, no matter where they’re based, tend to perform well financially, with strong balance sheets, long-term profits and low underwriting losses. In fact, 78 per cent of rated captives earned the two highest balance sheet strength ratings: “strongest” and “very strong".

In 2024, AM Best-rated US captives posted $1.3 billion in net income, down from $1.5 billion the previous year. That 14 per cent dip followed a 51 per cent jump in net income the year before.

Still, the five-year average combined ratio for captives stood at 88 per cent, compared to 97 per cent for commercial peers, a sign that captives continue to outperform traditional insurers.

Combined ratio is a measure of an insurer’s underwriting profitability and financial health.

“There continues to be a noticeable increase in the adoption of captive insurance solutions by owners, sponsors and managers,” said Dan Teclaw, director at AM Best. He noted that while new formations have slowed in some sectors, “overall usage of captives for new lines or coverages such as employee benefit risks or parametric contracts is still expanding".

Bermuda captives are known for serving a wide range of industries, from energy to healthcare, and increasingly cover emerging risks such as cyberattacks and climate change, the report noted.

AM Best stated that understanding each captive’s specific industry and risk profile is key when assigning ratings.