The US property captive market is currently navigating a landscape marked by both stability and innovation, according to Michael Serricchio, Americas captive consulting leader at Marsh Captive Solutions.
“The state of the US property captive market is very similar to this time last year,” Serricchio observed, noting that while the market remains steady, certain factors, such as the quarter-over-quarter composite insurance rate changes, are exerting an influence.
Despite speculation that the hard market has ended, property captives continue to play a critical role in providing organisations with relief and flexibility amid ongoing uncertainties. Serricchio emphasised that property remains the dominant line of coverage in Marsh’s global captives, reflecting the persistent demand for captives as a solution for property-related risks. “Property is the number one line of coverage in all of Marsh captives,” he states, highlighting a remarkable 29% growth in property premium over the past year. This growth is driven by a combination of factors, including climate change, natural catastrophes, and economic uncertainties, which continue to push organisations toward captives as a means of managing risk.
One of the notable trends in the captive market is the increasing sophistication and creativity with which organisations are utilising captives. Serricchio pointed out that captives are not only filling in on layers and taking quota shares but are also “really driving up retentions.”
This approach allows companies to smooth out deductibles across different business units and countries, ensuring compliance and optimising their risk management strategies. For example, a corporation with varying deductible levels across its global operations can use a captive to harmonise these discrepancies, providing consistent coverage and financial predictability.
The challenging property insurance landscape in certain US states, particularly those prone to natural disasters like wildfires and hurricanes, has further underscored the importance of captives.
“Creativity is going to prevail over the long term,” Serricchio asserted, highlighting the need for innovative solutions to address the coverage gaps in high-risk areas like California, Florida, and Puerto Rico.
In these regions, captives are increasingly being used in conjunction with pools, agencies, front-end carriers, and even catastrophe bonds to provide essential coverage for homeowners and commercial properties alike. While this response is still “slow and conservative,” Serricchio believes that captives will continue to evolve and adapt to these challenges, offering unique solutions where traditional insurance falls short.
Serricchio also touched on the growing maturity of captives, particularly in their willingness to take on larger limits. “For the first time last year, Marsh invested in technology called Policy Engine,” he noted, which provides insights into the premiums, limits, and reinsurance activities of their captives.
The data reveals that over 85% of Marsh’s captives writing property are now taking on limits of ten million dollars or more, a significant increase that underscores the growing confidence and capability within the captive market. This trend contrasts with other lines of coverage like cyber or auto, where limits are generally lower, further highlighting property’s unique position within the captive space.
As the US property captive market continues to navigate a post-hard market environment, the emphasis on creativity, adaptability, and robust coverage remains paramount. “Captives are responding, and they’re responding slowly and conservatively,” said Serricchio, but their role as a vital tool in the risk management arsenal is clear. With ongoing challenges such as climate change and economic uncertainty, the demand for property captives is likely to remain strong, ensuring their continued evolution and importance in the insurance landscape.
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