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Best’s News & Research Service - November 21, 2022 12:19 PM (EST)

Best’s Market Segment Report: Rated Bermuda, Cayman Islands and Barbados Captives Still Outperforming Commercial Peers

  • November 21, 2022 12:19 PM (EST)
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Oldwick //BestWire// - Rated Bermuda, Cayman Islands and Barbados (BCIB) captive insurance companies have continued to outperform their U.S. commercial casualty peers, as evidenced by a combined ratio approximately 13 percentage points better over the most recent five-year period, according to an AM Best report.

The new Best’s Special Report, titled, “Rated BCIB Captives Still Outperforming Commercial Peers,” states that current hard insurance market has provided ample growth opportunities for the BCIB captive industries to date. In addition, the BCIB captives’ operating results correlate highly with those of captives domiciled in the United States and continue to outpace those of their peers in the commercial casualty composite.

“The BCIB captive composite’s income generation has been remarkably consistent and tends to be driven by its favorable underwriting results, which are well-supported by the captives’ familiarity and extensive knowledge of the risks that they cover,” said Robert Gabriel, financial analyst, AM Best. “Return on revenue, which takes into account a company’s net income relative to net premiums earned, demonstrates how highly profitable the BCIB captives are.”

All but one of 25 AM Best-rated captives in the BCIB composite reported positive net income in 2021, according to the report. The composite’s net income total of $1.3 billion in 2021 was a 4.7% improvement over the previous year. Although the composite’s return on revenue has been declining since 2019, it is still almost three times that of the commercial casualty composite’s average.

The report also notes that unlike traditional property/casualty insurers, captives are not under pressure from stakeholders to generate returns on equity or revenue. From 2017 to 2021, the BCIB captives were able to grow surplus by $2.3 billion, even after paying out $1.7 billion in dividends. This translates into $4 billion in savings from the use of captive vehicles as an alternative to organizations using the commercial insurance market.

AM Best expects that 2022 surplus gains may be relatively small, as unrealized losses on fixed-income assets due to rising interest rates through the year may fully offset operating income. Further, unrealized losses are also likely to be negatively impacted by significant declines in the market value of captives’ equity holdings in 2022. However, as interest rates rise, captives should benefit from higher reinvestment rates on their fixed-income assets.

To access the full copy of this market segment report, please visit .

To view current Best’s Market Segment Outlooks, please visit .

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit .

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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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