In its latest market segment analysis, AM Best finds that rated US captives posted US$1.3 billion in net income for 2024 — down from US$1.5 billion the previous year — but still achieved a five-year average combined ratio of 88, well ahead of the 97 reported by commercial casualty peers. The report, ‘Captive and Alternative Risk Entities Continue to Emerge and Excel’, highlights the long-term cost efficiencies achieved by captives, including US$4.6 billion added to year-end surplus and US$2 billion returned in dividends between 2019 and 2024. AM Best estimates this equates to $6.6 billion in insurance cost savings versus the commercial market. While the sector experienced a 9.6-point deterioration in combined ratio in 2024 — reaching 98.5 — the segment remains resilient, with underwriting volatility still outweighed by long-term value creation. “There continues to be a noticeable increase in the adoption of captive insurance solutions by owners, sponsors and managers, although the pace of formations has slowed some as the hard market has gradually abated in certain lines of business, such as D&O or cyber,” says Dan Teclaw, director at AM Best. “However, overall usage of captives for new lines or coverages such as employee benefit risks or parametric contracts is still expanding, reflected by sustained year-over-year increases in premiums.” According to AM Best, captives retain a structural advantage thanks to their tight integration with owners’ enterprise risk management strategies, direct alignment of incentives, and focused underwriting approach. Teclaw added: “When risks appear overpriced or unavailable at the terms and conditions a company may need, captives have the flexibility to step in and customize if they have appropriate capital support. “Although captives are not created with the intention of being profit centers for their organizations, they remain highly profitable, and AM Best would expect captives’ results will continue to be favorable in 2025.” The full report is available at AM Best’s website, with a market briefing on the state of the captive industry scheduled for 6 August.
