JULY 29, 2020 08:32 AM (EDT)
Best’s Market Segment Report: Commercial Insurance Market Dislocation Could Present New Opportunities for Captives
FOR IMMEDIATE RELEASE
OLDWICK - JULY 29, 2020 08:32 AM (EDT)
The Best’s Market Segment Report, “Commercial Market Dislocation Could Provide New Opportunities for Captives to Fill the Void,” states that U.S. captive insurance companies rated by AM Best continued their run of strong financial results in 2019, with pretax operating income of $918 million. Although this was down 16% from the $1.1 billion in earnings reported in 2018, the segment remained extremely profitable, and once again outperformed its commercial market counterparts. The captive composite’s most recent five-year period average combined ratio (after policyholder dividends) of 92.0% compares favorably with the 100.8% posted by the commercial casualty composite. Additionally, between 2015 and 2019, captives added $3.8 billion to their year-end surplus and returned $4.4 billion in stockholder and policyholder dividends, representing $8.2 billion in insurance cost savings that captives retained for their own organizations by not purchasing coverage from third parties in the commercial market.
According to the report, captives also may contemplate opportunities to expand their writings to traditional lines of business where rates have climbed following resurgent catastrophe losses, as well as because of ongoing uncertainties related to COVID-19. Potential coverage offerings captives may explore—particularly, single parent captives—are employee benefits and medical stop loss, as companies look to captives to help improve the overall health and well-being of workers and to cut overall medical costs. Rate increases for lines such as director and officers, errors and omissions and commercial automobile may also spur captive interest and help reduce claims costs.
AM Best’s overall assessment of the captive industry remains favorable due to the segment’s consistent, positive long-term underwriting results and flexibility to creatively, and efficiently, address standard market challenges. These results and attributes exemplify strong commitment and support from stakeholders, as evidenced by comprehensive risk management and loss control efforts embedded into the captive culture. AM Best also believes that the vast majority of captive insurers are extremely well-capitalized to withstand the impact of the COVID-19 pandemic.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=299661 .
For a video discussion about this report with Dan Teclaw, AM Best senior financial analyst, please go to http://www.ambest.com/v.asp?v=ambcaptives820 .
AM Best today (July 29, 2020) at 1 p.m. EDT will host a webinar on the U.S. captive insurance market. At the event, a panel of rating analysts and industry leaders will review market, regulatory and risk issues affecting the captive insurance sector, as well as the impact of the COVID-19 pandemic. To register, please go to http://www.ambest.com/webinars/captives .
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.