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Substantial growth in non-traditional captive coverage.

Byline: Jayleen R. Heft

According to a new benchmarking report published by Marsh, there was an overall 11% rise in the number of captives writing non-traditional coverage lines in 2014. The biggest increase came from political risk, where the number of captives that include political risk rose 83% in 2014.

Additionally, the number of captives writing cyber liability grew 18%.

[Related: 5 steps to improving your captive's performance]

Once almost exclusive to the Fortune 500 and Financial Times Stock Exchange (FTSE) 100 companies, Marsh said captives now can provide benefits to organizations of all sizes, industries, and geographic orientation. Captives have been rapidly expanding throughout the middle market space, which is anticipated to be a robust growth sector for the captive industry in the future.

Value of adding TRIPRA coverage to existing captives

The 8th annual report, The World of Captives: Growth and Opporutnities Without Borders, is based on the activities of more than 1,100 captives under Marsh's management. Among the conclusions from the Marsh report is that with the newly extended Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA), the number of captive owners taking advantage of the government program is expected to rise in 2015. Currently, only 83 or 22% of the 374 U.S. captives under Marsh management access TRIPRA, by writing either conventional terrorism coverage for property damage or the excluded nuclear, biological, chemical, and radiological perils.

Other key findings of the report:

* Captive domiciles are flourishing in the European Union under Solvency II.

* Emerging markets in Latin America, China, and the Middle East are further embracing the use of captives.

* Small captives are the fastest growing segment--more evidence that captives make sense for companies of all sizes.

* 47% of U.S. owned captives actually achieve insurance tax status and deduct premiums paid to the captive.

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Publication:Property and Casualty 360
Date:May 12, 2015
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