More Captives Profiting from Third-party Risks in Digital Era: Marsh Report

New York, NY   |   May 30, 2019

The number of captive insurance companies writing third-party business is growing at double-digit pace as the digital era expands the ways that organizations deliver insurance solutions, according to a new report published today by Marsh, the world’s leading insurance broker and risk adviser.

Technology advances, including mobile applications, are making it easier for organizations to offer insurance to their customers and suppliers today, Marsh notes in its 2019 Captive Landscape Report, which examines trends among 1,100 captives managed by Marsh Captive Solutions globally. By underwriting those third-party risks in a captive, parent companies can bring in additional premium and generate profits should the captive perform well.

According to the report, 22% of Marsh-managed captives wrote some form of third-party business in 2018, representing a year-over-year increase of 12% and a 62% increase over the last five years. In particular, coverage for contractor, vendor, and customer risk continued its steep growth trajectory, increasing 138% among Marsh managed captives in the past five years. In 2018, Marsh captives writing such third-party risk generated a total of US$162 million in net premiums.

Likewise, Marsh-managed captives wrote more than US$3 billion of net premiums for extended warranty coverage in 2018. The number of Marsh captives writing such coverage, which protects a variety of assets from computers to automobiles, increased 22% over the last five years.

“More risk professionals today are embracing captives as a tool to secure their organization’s futures, whether it’s generating profits by underwriting third-party risks, accessing reinsurance, or providing cost efficiencies, ” said Ellen Charnley, President of Marsh Captive Solutions. “No matter the structure or premium volume, captives offer flexibility to access and protect capital, accelerate business objectives, and facilitate the funding of programs that promote employee health, well-being, and safety.”

Other key findings from the report include:

• Over the past five years, the number of Marsh-managed captives writing multinational employee benefits increased 243% and those writing cyber liability coverage increased 95%.
• Among regions where captive parents are based, growth over the past five years has been robust: Asia-Pacific, up 24%; Middle East, up 33%; Caribbean, up 18%; and Latin America, up 17%.
• Financial institutions remain the largest user of captives, representing nearly 23% of Marsh- managed captives.
• Emerging technologies like blockchain represent opportunities for captives to not only insure new risks, but to also reduce operating expenses by facilitating the distribution of policy information, proof of insurance, and claims payment.

About Marsh

Marsh is the world’s leading insurance broker and risk advisor. With around 40,000 colleagues operating in more than 130 countries, Marsh serves commercial and individual clients with data-driven risk solutions and advisory services.  Marsh is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people. With annual revenue over $17 billion, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment through four market-leading businesses:. Marsh, Guy Carpenter, Mercer  and Oliver Wyman.  For more information, visit mmc.com, follow us on LinkedIn and Twitter or subscribe to BRINK.