Captive insurers doubled their profits in 2009 as the industry's investments recovered from the depths of the recession in 2008, according to a special report by AM Best Co.

The survey of 195 US insurers revealed that realised capital gains totalled $82 million last year, compared with $1.2 billion of realised capital losses the prior year.

Best's report also found that net underwriting income decreased from the previous year as captives continued to focus on providing coverage and stable pricing to their constituents and rather than producing large underwriting profits.

Captives recorded policyholder dividends of 3.4 percent in 2009, down 1.2 percentage points from 2008, as companies rebuilt surplus that was destroyed during the crisis, while net investment income was $1.6 billion last year compared with $1.9 billion in 2008.

Amid continued softening market conditions, many captives also told Best that they continue to hold the line and will let business go if premium rates are too low.

The report showed that captive formations continued despite a softening commercial insurance market, and in the midst of an economic crisis, new captive domiciles were finding it difficult to establish their presence in the market.

It concluded that the outlook for the captive industry remained stable, with many well run risk retention groups (RRG) continuing to thrive despite the soft market, changing market profiles and economic turmoil; and within Best's 32 letter-rated RRGs, admitted assets and policyholders' surplus at December 31, 2009 were up 6.9 percent and 19.5 percent, respectively, from December 31, 2008.