Carter Smith
Associate Vice President, Business Insurance
Rising claims costs, nuclear verdicts, and natural disasters are coming together to create some of the toughest insurance renewals businesses have faced.
For many risk-aware organizations, it feels like they’re footing the bill for broader market losses, leading them to seek smarter, more independent ways to manage risk.
Captive insurance, once seen as a niche tool for big global companies, is gaining popularity as more companies look for alternative risk structures for stability. In 2024 alone, 6,290 captives were licensed worldwide, according to Business Insurance.
As adoption accelerates, many are asking the same question: Is a captive right for us?
What is a captive insurance company?
A captive is an insurance company owned and controlled by the business it covers. Instead of buying coverage from a third-party carrier, the company creates or joins a captive to underwrite select risks on its own terms.
There are several models:
- Single-parent captive: Owned and controlled by one member company
- Group captive: Owned and controlled by multiple companies to insure or reinsure the group’s risks
- Rent-a-captive: A structure where the owner rents access to their captive to outside parties
Captive vs. group captive insurance: What you gain
Captive insurance changes the usual way insurance works. Instead of paying premiums to a carrier and hoping for the best, companies keep more of their insurance dollars working for them with more control over claims, coverage, and costs. That shift offers some clear benefits, such as:
- Transparency in how risk is priced
- Premiums that match your actual performance
- Direct control over claims and service providers
- Potential to earn investment and underwriting profits
Group captives work similarly, but instead of one company going solo, several unrelated companies come together under one captive. Each company insures its own risk but shares services and benefits from the group’s size. This unique structure offers its own advantages, such as:
- Premiums based on each company’s loss history
- Ownership shares and voting rights
- Access to shared loss control tools and programs
- Profit distributions based on individual results
The model is proving its value. In 2023, U.S. captives rated by AM Best reported a 53% increase in net income, highlighting how useful this structure can be for companies that manage risk effectively.
Is your business a fit for captive insurance?
Captives work best for established companies with a good risk management track record. These businesses are usually privately owned or closely held, financially stable, and committed to controlling insurance costs over the long run.
What sets them apart is consistency: a clean loss history, a strong safety culture, internal accountability, and leadership that’s involved in risk planning. The whole organization is checked before joining a group setup, so transparency and good operational habits are non-negotiable.
Companies that have trouble qualifying are often too small, too risky, or too hands-off. This includes those with frequent or serious losses, limited capital, or exposure types that are hard to underwrite.
Some companies aren’t ready for the level of commitment needed, whether investing funds upfront, taking part in governance, or managing claims closely. Captives aren’t designed to rescue companies from market conditions but to reward businesses that outperform them.
Take control of your insurance strategy.
For well-managed businesses with a long-term outlook, captive insurance can turn risk management from a cost center into a way to gain control, stability, and potential returns. Now is a good time to see if this structure fits your goals, operational needs, and comfort for taking on more responsibility.
Connect with a Marsh McLennan Agency advisor to explore whether a captive makes sense for you. Then, start building an insurance plan that combines captive knowledge with your own loss control efforts.
