Captive Use Rises Amid Challenging Global Market Conditions and Pandemic: Marsh Report

More organizations are turning to the use of captives for insurance protection and financial flexibility in response to an increasingly difficult risk and insurance landscape, according to Marsh, the world’s leading insurance broker and risk advisor.

Source: Marsh | Published on September 21, 2020

Property/Casualty insurance
P&C underwriting performance improves except Person Lines

In its 2020 Captive Landscape Report, published today, Marsh reports that tightening global insurance market conditions throughout 2019 led to higher captive utilization with steep premium volume growth in several coverage lines. For example, supply chain, business interruption, and contingent business interruption premiums written by Marsh-managed captives rose 283% on average in 2019. All-risk property premiums rose 64% on average, led by the energy and financial institutions sectors, which saw all-risk property premiums rise 151% and 104%, respectively.

The trend towards great captive use has continued in the first half of 2020 amid increasingly challenging insurance market conditions and the impact of the global COVID-19 pandemic.

“Marsh formed a record 76 new captive insurance companies from January through July this year, up over 200% compared to the same period in 2019,” said Ellen Charnley, President of Marsh Captive Solutions. “While none of the new captives formed so far in 2020 specifically cover pandemic-related losses, organizations are using their captives to help navigate them through the global COVID-19 pandemic.

“Financial flexibility is one of the key advantages of owning captives, and since March 2020, Marsh has helped owners free $3 billion from their captives using short-term liquidity tactics, such as intercompany lending, to help them respond to cash-flow challenges brought on by the pandemic,” she said.

The 2020 Captive Landscape Report: Captives Offer Value in Uncertain Times is based on approximately 1,240 Marsh-managed captives around the world that agree to share their data on an anonymous and aggregated basis.