More organisations seek to address uncertain global risk environment through captive insurance companies: Marsh Report

MAY 11, 2016

Marsh, a leading insurance broker and risk advisor, and a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (NYSE: MMC), on Wednesday published its 2016 Captive Benchmarking Report, which examines today’s increasingly complex global risk landscape and the roles that captives can play in addressing these unique challenges. 

The report, which benchmarked 1,139 captives around the world under Marsh management, found that the number of captive owners writing non-traditional risks rose considerably in 2015, suggesting a growing trend among organizations seeking to address rapidly developing risks through the use of a captive. For example, the number of Marsh-managed captives writing supply chain risk grew 133% in 2015, while those writing cyber liability grew 30%; those writing political risk grew 27%; and the number accessing the Terrorism Risk Insurance Act (TRIA) increased 17%.

“Some of today’s risks, including cyber, political risk, and terrorism, are evolving so fast that at times the insurance markets struggle to come up with appropriate solutions to address them,” said Chris Lay, president of Marsh Captive Solutions.

“Captives offer a unique solution for organizations that are struggling to find adequate insurance solutions and are a nimble tool that can quickly respond in the event of a catastrophic loss,” he said.

Other key findings from the report, Marsh Captive Solutions: Creating Security in an Uncertain World, include:

  • The number of owners using captives for multinational employee benefits increased 143% in 2015, representing the fastest growing non-traditional risk in Marsh-managed captives. 
  • Latin America is the fastest growing developing market for captives. Over the past three years, Marsh worked on 42 active captive opportunities and delivered 20 advisory projects for organizations in Latin America.
  • Only 48% of Marsh’s US-managed captives qualify as an insurance company for federal income tax purposes, providing further evidence that captives are formed for multiple risk management reasons.
  • Marsh is seeing more interest and expects increased captive growth in the construction, energy, real estate, education, and sports/entertainment/events industries.