AM Best-rated US captive insurance companies generate an estimated US$8.2 billion in savings for their parent organisations over the five years to the end of 2025, according to a new Best's Market Segment Report. The figure comprises US$4.1 billion in surplus growth and US$4.1 billion in dividends, which AM Best says would otherwise have gone to the commercial market. The report, Rated Captives Continue to Demonstrate Financial Stability in an Evolving Risk Landscape, finds that the underwriting performance of rated US captives continues to exceed that of commercial casualty peers, with the rating agency expecting the outperformance to continue. Comparing rated US captives in the Captive Insurance Composite (CIC) with companies in the Commercial Casualty Composite (CCC), AM Best puts the five-year average combined ratio before dividends at 89.1 for the CIC against 96.7 for the CCC. The five-year operating ratio stands at 78.1 for the CIC, compared with 84.8 for the CCC. Total underwriting expense for the CIC is 17.7 against 28.1 for the CCC over the same period, with the commission expense ratio at 3.1 points compared with 12.1 points for the commercial market. Underwriting performance nonetheless comes under pressure across 2024 and 2025, with a combined US$654.1 million underwriting loss attributed to elevated loss activity. The loss and loss adjustment expense ratio rises by almost 10 points over the past two years compared with the previous five, driven most notably by workers' compensation and fire lines. Net premium written increases 7 per cent at year-end 2025, taking the five-year rise to 65.5 per cent. AM Best attributes the growth largely to captives increasing exposures through new lines and coverages rather than to rate increases. The dividend ratio nearly doubles year on year to 10.6 points in 2025, the second highest reading of the past five years. AM Best-rated captives pay more than US$2.5 billion in policyholder dividends over the five-year period. AM Best rates more than 220 captive companies globally, around 70 per cent of which are domiciled in the US, with about 17 per cent in the Caribbean and the remaining 13 per cent in other domiciles. Among rated US captives, medical professional liability represents the largest business line at 38 per cent, followed by other liability and commercial casualty at 34 per cent, commercial property at 9 per cent and workers' compensation at 6 per cent. The report puts the global total at approximately 75 to 89 captive domiciles serving between 7,000 and 8,000 captive entities. Vermont reports 51 new captive insurance companies for 2025, taking the number of active captives to 707, alongside 36 new cell captives. Utah reports a total of 605 as of year-end 2025, including cell captives, while Delaware reports 21 new captives including cells to reach 638. North Carolina records 21 new formations, excluding cells and series, for a total of 263. AM Best notes that the captive market remains in growth mode even as more affordable capacity increases in the traditional market, with organisations increasingly viewing captives as long-term strategic components rather than a workaround during hard markets. Owners are expanding the use of existing captives beyond traditional products into lines including employee benefits and cyber and, to a lesser extent, parametric solutions covering climate-related risks and supply chain disruption. The rating agency revised its Rating Captives and Other Alternative Risk Transfer Entities criteria in August 2025, with the most significant changes reflecting an updated approach to certain protected cell structures, including distinct treatment of unincorporated cell companies and individual incorporated cell entities. AM Best expects captives to continue to record favourable results in 2026, absent any unforeseen systemic catastrophic events.
