Best Market Segment Report: US Occupied Insurance Moves Between Troubled and Expensive

OLDWICK, NJ, August 04, 2022–(BUSINESS WIRE)– The captive insurance market segment in the US continued to generate profits and surpluses in 2021 as they outperformed their market peers, according to new data. AM Best report.

The Best Special Report, “US Captive Insurance: Moving Amid Crisis and Pricing Challenges,” says AM Best US captives reported another strong year, with taxable income of $1.0 billion, down slightly from $ 1.1 billion reported in 2021. The five-year cumulative average of 84.5 posted by AM’s best-rated U.S. customers surpassed the 99.4 of their commercial counterparts. Year by year, these US slaves recorded a 1.8 percent change in their combined ratio to 85.4 in 2021. Overall, between 2017 and 2021, they added $4.3 billion to their year-end balance while returning $5.8 billion in stockholder and policyholder dividends, that represents $10.1 billion in insurance premiums that the captives saved for their organizations by not buying money from other people in the stock market.

“The inherent flexibility of the captive sector in risk management allows for profitability and sustainability while generating value for policyholders and stakeholders, regardless of market conditions,” said Dan Teclaw, managing director, AM Best.

Reimbursement remains a challenge for US rated insurers. In 2021, the total return on investment increased slightly, which when combined with the capital gains, the gross income returns to 4.1% from 3.9%.

Capital expenditures still contribute significantly to operating profit despite weak returns from growing companies.

According to the report, the number of US captives continues to rise, although the growth of captives has stalled due to economic uncertainty caused by the pandemic, as well as ongoing audits from the IRS and regulatory and reporting requirements. However, this has led insurers to explore alternative and flexible options that captives can offer.

“The difficulty of the stock market highlights the benefits of the captive sector and gives businesses the incentive to set up,” said Fred Eslami, managing director, AM Best. “In difficult markets, some non-insurance companies may think that the market does not understand or overestimate the value of their views on their risks, so they seek to create captives. The current environment allows captives to hide risks that may be rare or difficult to find. write or put it on the public market.”

For the full report on this market segment, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=322542.

AM Best continues to be the leading rating agency, with over 200 vehicles rated in the United States and around the world. For the latest information on Best Credit Ratings and independent data on the captive insurance market and other risk management strategies, please visit www.ambest.com/captive.

AM Best is a global credit agency, news publisher and data analytics provider specializing in the insurance industry. The company is headquartered in the United States, and does business in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by AM Best Rating Services, Inc. and/or partners. ALL RIGHTS RESERVED.

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Contacts

Dan Teclaw
Support Assistant
+1 908 439 2200, ext. 5394
dan.teclaw@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Fred Eslami
Support Assistant
+1 908 439 2200, ext. 5406
fred.eslami@ambest.com

Jeff Mango
General Manager,
Strategy & Communications
+1 908 439 2200, ext. 5204
jeffrey.mango@ambest.com