A.M. Best Special Report: Growth Slows For Rated Non-U.S. Captives.

OLDWICK, N.J. -- A.M. Best Co. possesses a substantial amount of data and information on captives and assigns interactive ratings to a number of these, most of which are very well capitalized. This report provides some information on those rated captives that are domiciled outside the United States and for which audited 2005 financial statements were available at the time of publication.

It should be noted, however, that the immense size, diversity and reserved nature of the captive universe, not to mention the limited data available, render statistical studies ambiguous. In addition, due to the mission of captivesCoprimarily to serve the risk management needs of companiesCoand their establishment in domiciles with relatively modest capital requirements, the perceived and actual need for strong capitalization and operating performance is not as great as it is for insurers that sell insurance commercially. Therefore, caution must be exercised in making comparisons and drawing conclusions from these data.

The population used in this study is very diverse in nature and size, though most are single-parent captives. It represents 30 rated companies, both U.S. and non-U.S. owned, domiciled in various foreign territories and all of which can be characterized as single-parent and multimember/owner captive entities formed to address the insurance needs of specific owners and groups.

The business written by this group represents predominantly casualty business, though several captives have significant amounts of property coverage or even focus on property business. Reflecting the relative importance of the various foreign captive domiciles, more than half of the captives in this group are domiciled in Bermuda. The next largest domicile represented is the Cayman Islands.

This group of non-U.S. captives wrote $2.3 billion in gross premiums in 2005 and $1.9 billion in net premiums. The largest captive in this population wrote more than $1.1 billion of gross premiums, while the smallest wrote $3 million.

While the softening insurance market for casualty business muted the growth of premiums in 2005, the dislocations on the property side caused by the unprecedented hurricane activity in 2004 and 2005 helped to limit this effect.

Total assets represented by this population were $13.5 billion, and total surplus was $5.8 billion. The captive with the most premiums written also held the largest share of total assets with $5.3 billion.

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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.