In a soft commercial market environment, the number of captive insurance companies established in the world's major captive domiciles still maintained moderate growth.

        In Vermont, the largest U.S. captive domicile, the number of registered captives reached 566 in 2017, with 24 newly approved captives during the year, down from 37 in 2015 and 26 in 2016 respectively.

        Reports from other captive domiciles also showed low growth. For example, Montana established 42 new captives in 2017, compared with 60 in 2016; in Nevada, the number of captives approved by regulators last year fell from 30 in 2016 to 22; in Utah, 60 new captives were established in 2017, five fewer than the number newly registered in 2016; and in Texas, insurance regulators approved 8 captives, fewer than the 13 in 2016.

        Meanwhile, some captive domiciles reported that captive growth remained stable over the long term. In Arizona, the number of new captives established each year has stayed in the 7-13 range since 2010. By the end of 2017, the state had 121 captives, up from 113 in 2016.

        In other captive domiciles, captives likewise grew moderately, with captives underwriting more risks. In Tennessee, 9 new single-parent captives were established in 2017, and captive premiums exceeded $1 billion for the first time.

        Michael Corbett, Tennessee's captive insurance regulator, said: "Captive owners are finding better ways to manage risk and increase risk coverage through existing programs, bringing more premiums to their captives."

        Tom Jones, a consultant at Chicago-based McDermott Will & Emery, said: "Compared with an increase in the number of captives, the growth of business written by captives is more valuable."

        However, in other captive domiciles, because some owners of multiple captives decided to merge their captives or re-domicile to new jurisdictions, in the past year the number of captives exiting the market exceeded the number of newly established companies.

        In Montana, for example, 42 new captives were registered in 2017, but 52 captives exited; in the Cayman Islands, the world's second-largest captive domicile, there were 696 captives in 2017, and although 33 new captives were registered, 48 captives closed their businesses.

        In Bermuda, the world's largest captive domicile, 17 new captives were registered in 2017, up from 13 in 2016, but the total number of captives fell from 776 in 2016 to 739.

        Jeff Kehler, South Carolina's captive insurance regulator, said that given the current soft market environment and the saturated large-corporate segment, expecting 20-30 new captive registrations every year is no longer realistic. South Carolina established 15 new captives in 2017, bringing its total number of captives to 169.

        Meanwhile, mergers of parent companies that own captives are also an important factor behind the decline in captive numbers. Nancy Gray, head of Aon's captive and insurance management practice in Burlington, Vermont, said many merged companies find that they do not need multiple captives.

        Many U.S. captive experts still expect captive growth prospects to improve as the U.S. economy gets better.

Source: captive.com