Not a surprise to those of us in the captive insurance industry to see the 2021 Captive Benchmarking Survey from Aon highlighting that captive insurance growth is occurring at a level not seen in two decades. Price increases in primary insurance markets over the past two years have led captive insurance company owners to retain more risk as they look to maintain appropriate levels of coverage while controlling costs.
You only need to talk to the many VCIA members providing services to captives to see how busy they all are. And talking to Dave Provost at Vermont’s Department of Financial Regulation confirms the report. Last year saw a big spike in captive formations and it looks like they are on track for a bigger year for 2021.
Aon’s report said that since 2018 they have seen a 73 percent increase in premium retention among the captives it manages. The types of risk covered have grown to include risks that are difficult to place or emerging perils, such as cyber and environmental. According to the report, over the past 5 years Aon has seen a 650 percent increase in cyber-insurance premiums in captives, while environmental risks have seen a 400 percent premium increase since 2018.
In addition, AM Best released a report in August showing that the operating performance of rated U.S. captive insurance companies continued to surpass that of their commercial market peers in 2020. The captive insurance industry has shown its colors in these trying times over the past few years. It will only pay dividends for their owners in the years to come.
I look forward to seeing many of you at our in-person VCIA Mixers and other events beginning this October. Until then, stay well!
Rich Smith, President, VCIA