A.M. Best-rated captive insurers in Bermuda, the Cayman Islands, and Barbados (BCIB) have had consistently strong operating results, continuing to outperform the US commercial market sector in 2017, according to a report by A.M. Best.
The ratings agency’s report on BCIB captives noted that, in 2017, A.M. Best-rated captives from the three domiciles bolstered their operating performance with increased risk awareness, loss control, and the ability to integrate sound risk management practices.
In the report, A.M. Best stated that it “believes that the captive segment, in general, will continue to outperform the US commercial casualty composite by a healthy margin, by managing the risks it knows better than any commercial insurer and by retaining risks within its risk tolerances”.
It added: “Captive insurers remain the beneficiaries of very productive business models and strong loss control and risk management practices, culminating in solid underwriting profits and strong growth in surplus.”
The BCIB captives rated by A.M. Best reported profitable financial results in 2017 that were in line with historical averages.
The report revealed that total assets increased by 7.7 percent and policy surplus rose 11.4 percent to almost $10.5 billion.
This sector’s total return on revenue also rose to 35.3 percent in 2017, up from 27.3 percent in 2016.
Underwriting results declined but remained significantly above the results posted by A.M. Best’s composite of US commercial casualty insurers.
The captives’ five-year average combined ratio for 2013 to 2017 far exceeded that of their peers in the US commercial casualty segment by nearly 21 points.
Additionally, the report showed that there was a 1.9 percent increase in net premiums earned, as well as an improve the net income.
A.M. Best noted: “Premium growth for captive insurers is usually a function of insured exposure growth or a captive’s desire to withdraw or write additional or new risks when the opportunities arise.”
The ratings agency highlighted cyber liability and medical stop loss as two areas of recent interest but revealed that though these are certainly growth opportunities, most of the A.M. Best-rated captives write either limited or no coverage for these risks.
Overall, the capital levels of the captives are healthy and more than supportive of the risks underwritten.
Between 2013 and 2017, the BCIB A.M. Best-rated captives added more than $2.9 billion to their capital and surplus, after providing more than $1 billion in dividends, which translates into $3.9 billion in savings.
