The captive insurance market has expanded in Latin America over the past decade despite facing challenges such as regulatory scrutiny, limited fronting services, and reputational risks, said panellists at the 2025 World Captive Forum in Florida.
In a session titled ‘LatAm’s Resurgence: The Post-Covid New Normal’, Eduardo Fox, consultant for private clients, trusts, and Latin America at Appleby Bermuda, highlighted that LatAm is the fastest-growing region globally in terms of captive insurance.
He noted that the number of captives in the region has doubled from between 80-100 in 2015, to over 200 today, with Bermuda hosting about a third of them. He clarified that this figure includes only pure captives, excluding secondary structures such as segregated accounts.
“Companies utilising segregated accounts typically take three to five years before establishing their own captive,” Fox explained. “If they find a segregated account to be a better fit, they will stay with it. It is cheaper, and they do not have to worry about management.”
Discussing the legal landscape, Javier Ordoñez Namihira, partner at Baker & McKenzie Mexico, said that regulations influenced by OECD recommendations have been locally implemented over the past four years and even earlier, significantly impacting captives.
He noted that LatAm governments are increasingly focused on boosting tax revenues to fund social programmes. “Most countries in the region face low levels of tax collection, prompting them to introduce anti-deferral rules targeting offshore structures,” he explained. “Authorities understand the economic benefits of captives but remain intent on enforcing compliance.”
In Mexico, anti-deferral rules have existed for over 20 years but were largely dormant until recently. “Mexico has enhanced its tax framework, while other countries such as Peru, Brazil, and Colombia have introduced similar measures,” Ordoñez Namihira stated. “Argentina has taken a less stringent approach but continues to evolve its regulations.”
He emphasised the importance of demonstrating economic substance when establishing a captive. “Tax authorities scrutinise captives to ensure they are more than just a tax planning tool,” he said. “Substance-over-form provisions require businesses to establish genuine risk transfer mechanisms, actuarial assessments, and feasibility studies to justify their captives.”
In the session, a panellist provided an overview of the LatAm captive market, highlighting its relatively small size compared to global markets. Captives in the region typically manage between US$1-5 million in premiums annually, whereas their counterparts in the US, Europe, and Asia often start at US$10 million.
Due to cost constraints, market trends in Latin America favour segregated account structures over standalone captives. For captives handling around US$1 million in annual premiums, the standard costs associated with maintaining a full captive structure make it challenging to sustain.
Speakers pointed out key industries utilising captives in the region include construction, retail, healthcare, financial services, and transportation. In the construction sector, captives primarily cover liability risks, while retail businesses leverage them for extended warranties and climate-related insurance.
Healthcare has seen a growing reliance on captives, particularly in response to post-pandemic challenges, with medical malpractice coverage emerging as a key area of focus.
The financial services sector has also increased its use of captives, particularly as default risks have risen since Covid-19. Many financial institutions now turn to captives to cover default payments and insure personal financial products.
According to the panellists, one of the ongoing challenges in Latin America is the difficulty of securing fronting services. Local insurers are often reluctant to provide fronting, particularly for property and casualty risks, and fees can exceed 10–15 per cent of premiums, making it a costly requirement.
In many countries, including Colombia, Ecuador, Chile, Brazil, and Mexico, companies often face double fronting fees — one paid to the local insurer and another to the reinsurer.
Tax benefits available in various Latin American captive jurisdictions sometimes raise scepticism, particularly among those unfamiliar with the industry. Panellists said addressing this concern requires continued education and transparency to build trust in the captive model.
Another significant hurdle is the language barrier. Many Latin American businesses prefer conducting transactions in Spanish, yet finding Spanish-speaking counterparts within international firms remains a challenge.
Despite these obstacles, the panellists expect the region’s captive insurance market to continue expanding, with more companies recognising the value of captives as an essential component of their risk management strategies.
