2026 Captive Insurance Outlook: Expansion, Innovation, and Volatility

Existing captive insurance companies are positioned for continued growth and expansion over the next 12 months, as owners look to add coverages, increase retentions, and deploy captives to address emerging risks.

That outlook was shared by Jeff Wilson, captive insurance director with the Iowa Insurance Division, who expects auto and excess liability for transportation exposures, along with medical stop-loss coverage, to remain among the fastest-growing lines in captive insurance. He added that rising nuclear verdicts, social inflation, third-party litigation funding, and escalating medical costs are creating opportunities for captives to demonstrate their effectiveness in managing volatility and delivering long-term pricing stability.

"A great time to consider forming a captive is when the commercial insurance market is soft," said Mr. Wilson. "The soft market allows organizations to form captives from a position of strength rather than out of necessity. During a soft market, companies will have more of an opportunity to strategically plan, capitalize, and structure their captive without the pressure of rapidly rising premiums or shrinking capacity."

Mr. Wilson also expects group captives and cell structures to continue gaining momentum as organizations seek flexible and cost-effective entry points into captive programs without the administrative burden of forming a standalone entity. These structures, he said, allow midsized companies to access many of the same benefits as larger organizations, including improved risk control, enhanced data insights, and participation in underwriting performance.

"I believe in the 'crawl, walk, run' philosophy when it comes to captives," Mr. Wilson said. "Early on, it's about building a solid foundation and understanding the mechanics. As a captive matures, success depends on strategic growth, such as optimizing retentions, leveraging reinsurance, and deploying capital intelligently. Those that adopt a disciplined, forward-looking approach will thrive, while the 'set it and forget it' captives will miss opportunities. The real value of a captive goes well beyond just avoiding costs. Captives are a strategic vehicle for lowering the total cost of risk, improving the organization's risk profile, creating financial stability, and, ultimately, becoming a profit center."

Analytics Advantage

Mr. Wilson added that captive insurers making disciplined use of analytics will increasingly distinguish themselves as data-driven decisions around pricing, loss forecasting, and capital allocation lead to measurable performance improvements. He noted a broader shift away from instinct-based decision-making toward evidence-based captive management.

A similar outlook was shared by Kevin Walters, director of communications at the Tennessee Department of Commerce and Insurance, who anticipates continued captive growth across industries and organization sizes—from small businesses to large corporations. In terms of coverage, he said cyber risk remains a top consideration, while rising healthcare costs and legal verdicts continue to drive interest in medical stop-loss programs.

"Corporate risk managers continue to view the traditional marketplace as hardened in areas, such as liability, property, and cyber coverage, to name a few," said Mr. Walters. "Additionally, we have seen increased interest from the municipal sector with government-owned captives being formed to manage property risks and gain access to the reinsurance markets.

"As we close out 2025 and look toward 2026, we believe it's going to be a busy year for the captive world and for Tennessee."

Andrew Noga, captives director at the South Carolina Department of Insurance, also pointed to softening property rates as a favorable backdrop for captive formations, provided that trend continues into 2026. By leveraging more affordable commercial insurance and reinsurance, he said, organizations can smooth volatility, preserve capital, and reduce initial capital requirements in the early years of a captive's life—allowing surplus to build ahead of the next hard market cycle.

Parametric solutions for property catastrophe exposures, Mr. Noga added, are also expected to gain traction as experienced risk managers selectively deploy these tools to manage volatility at more predictable costs.

Mr. Noga further noted that captive usage is likely to expand in response to ongoing capacity and pricing challenges in the commercial market. He also expects artificial intelligence (AI) to become a more creative tool for underwriters and claims professionals, helping to better predict outcomes, profitability, and market penetration.

"Regulation of the captive insurance industry will be reviewed," he added. "Given the continued growth of captive formations and their prominence as a risk retention and financing tool, it is natural that regulators will begin to 'look under the hood' of multistate captives and compare those vehicles with the regulation of traditional insurance. The industry will have to work with regulators to ensure the benefits of captive insurance are maintained and not inhibited by regulatory pressures."

Continued Growth Across Lines

Mike Meehan, principal at Milliman, likewise expects continued captive growth in 2026, driven by challenges in select liability lines and broader economic and geopolitical uncertainty.

"I expect supply chain-related coverages to remain popular with organizations utilizing a captive solution," said Mr. Meehan. "I also expect to see captives being used to address challenges resulting from climate change and gaps in cyber liability coverage. In addition, I expect the market will continue to be impacted by self-procurement taxes and 831(b) election-related issues.

"One challenge I have seen developing over the past couple of years, which I would expect to continue into 2026, would be fronting interest or capacity with regard to select liability coverages. I also expect that private equity's role in litigation funding will remain a challenge for the industry. As the market continues to grow, the need for industry talent to support that growth will continue to be a challenge for many organizations, so it will be critical for organizations to work to develop the next generation of talent early."

Looking specifically at transportation risks, Adam Perea of EVO Captives Services at Elite Risk said trucking insurance is entering 2026 with persistent loss ratios in auto liability, rising nuclear verdicts, and tightening excess capacity—particularly for fleets with heavier or higher-hazard operations. He noted that umbrella and excess markets are pushing higher attachment points and double-digit rate increases, with some insurers limiting participation to low primary limits, leaving fleets with larger uninsured or self-insured layers.

"Tow trucks and related recovery operations are often treated as high-hazard transportation risks, facing the same social inflation, cargo theft, and severity trends as long-haul fleets, but with even fewer willing markets as acceptable pricing," said Mr. Perea. "This environment is pushing midsized fleets and towing operations with multiple locations to explore group captives, agency captives, and other alternative structures to stabilize their total cost of risk over multiple years."

Capital, Credit, and Industry Investment

From a banking perspective, Martin Ellis, senior vice president and manager of the Global and Captive Insurance Group at Comerica, said he is closely monitoring the regulatory environment to see whether there will be any easing of Basel III endgame requirements, which began phasing in on July 1, 2025.

"US banks with assets over $100 billion must now hold more capital against risk-weighted assets, including LOC (letters of credit) exposures, which may increase LOC pricing or reduce the capacity for LOC," said Mr. Ellis. "The banking industry is lobbying to ease Basel III requirements, since excessive capital demands could constrain lending. The final rules remain uncertain."

Dan Towle, president of the Captive Insurance Companies Association (CICA), expects continued interest from private equity investors in captive management firms and related service providers. He said this influx of capital could enable organizations to grow, innovate, and compete more effectively for talent.

"With rising wage pressure, increased demand for qualified professionals, and an aging workforce, more movement between companies is inevitable," said Mr. Towle. "Investment in recruitment and the development of young professionals will be essential to sustaining the industry's long-term growth."

He added that increased industry visibility is also drawing greater attention from policymakers, particularly at the federal level.

"Our priority now is clear: Sustained advocacy and education to ensure captives are understood, respected, and supported is more critical than ever before," Mr. Towle said. "CICA has already made meaningful investments and conducted important meetings to lead this effort."

Technology Adoption and Strategic Evolution

On the technology front, Rob Walling, principal and consulting actuary at Pinnacle Actuarial Services, said medium-sized captive managers, brokers, and actuarial firms are likely to follow market leaders in adopting best practices.

Mr. Walling also expects captive insurers to be used more creatively to mitigate economic uncertainty, including through financial insurance solutions designed to protect balance sheets.

"We are continuing to see new players enter the marketplace with fresh ideas and innovative coverage, and new domiciles pop up—and that's happening at a frenetic pace—as does demand for talent and creative problem solvers," said Mr. Walling.

Steve Bauman, multinational and captive programs director for the Americas at AXA XL, said captives will continue to play important roles in addressing emerging risks, such as AI, autonomous mobility, and infrastructure adaptation.

"Global multicaptive strategies could be more effectively utilized by a larger number of corporations," he said. "And it would be encouraging to see captives roll down further to smaller businesses, nonprofits, and increased charitable endeavors."

Kevin McGinley, vice president of Captive Management at Risk Management Advisors, also expects continued investment in analytics and alternative risk solutions.

"Investments in AI and analytics will be significant to allow for smarter underwriting and better claims handling to improve the industry's profitability," he said. "Alternative risk will continue to be adopted by the captive insurance industry, like parametric solutions. Premium increases and reductions in capacity in difficult industries like health care, transportation, and construction will continue to be the bedrock of captive growth."

Anne Marie Towle, CEO of Global Risk and Captive Solutions at Hylant, summarized the broader outlook, noting that the captive market is entering 2026 with both momentum and heightened expectations.

"Captives in 2026 will be judged not just by how much risk they retain, but how intentionally they finance resilience," she said. "The winners will combine disciplined underwriting, credible [environmental, social, and governance] impact, pragmatic use of parametrics and AI, and governance that stands tall under scrutiny. That's not a niche play; it's the blueprint for modern, enterprise-grade risk management."

Michael Jeffers, senior manager at Oliver Wyman, said demand for alternative risk transfer solutions in casualty lines is likely to continue growing, echoing shifts seen previously in the property market.

"ART (alternative risk transfer) solutions can deliver multiyear premium smoothing, client-tailored indemnity triggers, and material cash-flow and premium savings compared with annual, spot-market renewals," he said. "It would be wise for organizations to model out various market, captive, and ART scenarios to inform decision-making—not only from a cost perspective, but also through the lens of capital efficiency and risk tolerance."

Michael Maglaras, principal of Michael Maglaras & Company, concluded by pointing to growing captive activity in direct property coverage as climate-driven volatility continues to strain global capacity.

"We can expect much more captive activity in the direct property business and, specifically, as it affects time/element coverages, such as contingent business interruption," he said.