Captive Insurance 2025 Year in Review: Growth, Risk, and Resilience

The captive insurance industry continued to build on its momentum in 2025, driven by sustained demand from organizations seeking greater flexibility and cost control in their risk financing programs. The ongoing hard commercial insurance market—particularly for liability and excess liability—also pushed companies to explore solutions that allow them to retain more risk while accessing broader reinsurance capacity.

That environment supported continued growth across multiple areas of the captive insurance market, according to Mike Meehan, principal at Milliman, who cited strong activity in medical stop-loss and employee benefits programs.

"2025 was another great year for the captive industry," said Mr. Meehan. "Interest in the market continued to grow, and this was evident with the seemingly at or near record attendance at numerous captive-related conferences and events.

"The industry's larger domiciles, both in the United States and abroad, continued to experience significant growth with many new captive formations."

Property and supply chain coverage activity also remained steady, Mr. Meehan added, with growing interest in parametric solutions for those exposures. At the same time, he said artificial intelligence continued to gain traction among risk managers and service providers, supporting underwriting, claims analysis, trend identification, and risk forecasting both before and after losses.

Anne Marie Towle, CEO of global risk and captive solutions at Hylant, described 2025 as an inflection point for the captive sector, with more than 10,000 risk-bearing entities now operating globally across traditional captives, protected cells, and series limited liability company structures. Collectively, captives write approximately $62 billion in direct premiums annually, maintain a 5-year average combined ratio of 83 percent, and outperform commercial insurers by 17 points.

Prior Years of Growth

Steve Bauman, multinational and captive programs director, Americas, AXA XL, said the industry's recent performance reflects years of expansion in the United States, alongside growing global momentum through developments such as France's emergence as a captive domicile and early discussions around the United Kingdom following suit.

"2025 showed strong resiliency in the captive industry, with newer professionals stepping up into positions where industry-leading captive professionals vacated lofty positions," said Mr. Bauman. "And in 2025, the entrepreneurial and innovative spirit of captives continued to shine brighter than ever for more users in emerging risks and for smaller companies in group captives, cell captives, and more efficiencies in single-parent captives."

Ms. Towle added that access to captive structures has broadened significantly for mid-market and smaller organizations through group and cell programs. She also noted continued diversification beyond traditional lines such as workers compensation and general liability, with expanded use for cyber risk, supply chain risk financing, difference-in-conditions, voluntary benefits, and medical stop-loss. Additional applications now include warranty programs, tenant damage waivers, and other ancillary waiver structures that create new revenue streams.

For auto and excess liability, Jeff Wilson, captive insurance director at the Iowa Insurance Division, said captives were actively used in 2025, particularly among trucking and transportation companies seeking greater stability amid continued market volatility.

Building on this, Jeremy Colombik, managing partner at MSI, said transportation auto liability remained one of the most challenged classes throughout 2025, especially for trucking, tow trucks, and heavy commercial fleets facing nuclear verdicts, rising severity, and persistent driver shortages. Auto liability and umbrella/excess renewals, he added, trended well into positive double digits for fleets with hazardous operations, with higher attachment points and tighter terms becoming more common.

"In response, fleets increasingly turned to group and single-parent captives to manage primary and excess auto liability layers, often coupling in-house safety programs, telematics, and claims control with captive-funded layers beneath or between commercial towers," said Mr. Colombik. "For tow truck and recovery operations, where frequency-severity patterns and nuclear verdict exposure can make traditional excess auto capability scarce or prohibitively priced, captives offered a structure to retain the first layers of catastrophic risk and to make better use of limited commercial excess support."

Health care also continued to be a tough market in 2025, said Steve Gransbury, president of health solutions at Captive Resources. That, however, is where captives have proved their real value, he said.

"In 2025, we watched the healthcare landscape tighten in ways that challenged every stakeholder — rising claim severity, accelerating specialty drug spend, and a stop-loss market under real pressure," said Mr. Gransbury. "Yet in that same environment, captives proved their true value. We saw employers come together to harness first-dollar data, strengthen purchasing leverage, and align their pharmacy and clinical strategies in ways that would be impossible on a standalone basis.

"The shift toward aligned pharmacy benefit managers and transparent, shared-outcome partnerships wasn't just a theme of the year—it became a turning point. Employers realized they don't have to just absorb volatility; they can redesign around it. That spirit of collaboration and innovation across our member-led captives defined 2025, and it positioned employers not just to weather the market, but to actively reshape it."

Taking on More Risk

Kevin McGinley, vice president, captive management at Risk Management Advisors, added that captives have continued to increase the amount of risk they take on and retain more premium. He said owners of more mature captives were also looking to take on additional excess risk, particularly in transportation and construction.

Rob Walling, principal and consulting actuary at Pinnacle Actuarial Resources, said the biggest changes in 2025 involved the deployment of technology—including artificial intelligence and machine learning—throughout the captive industry and the ways it has altered clients’ risk profiles.

Mr. Walling added that current global trade uncertainty has also had a significant impact on investment markets, supply chains, and the business fundamentals of captive owners. That may include, he said, the cost of doing business, the ability to obtain raw materials, or the loss of key export markets.

"All of this economic uncertainty has become front of mind, as is the ongoing litigious environment in the United States and certain European markets, and immigration reform in Europe and the United States," said Mr. Walling. "All of that plays through indirectly into the captive industry in myriad ways."

Michael Maglaras, principal of Michael Maglaras & Company, described the emergence of what he termed the "mature captive."

"We've entered the era of the 'mature captive'... a captive formed 25 or even 35 years ago or more, with solid ratios of long-term liabilities to shareholders' equity and a mature claim development history," he said. "This phenomenon is important, as these mature captives are now poised to assist their parent organizations, more than ever, with responses to adverse changes in market conditions such as increased pressure for cyber coverage and the effects of climate change on the cost of property insurance portfolios."

Complementary Tool

Rather than competing with the traditional market, Mr. Wilson said captives increasingly serve as a complementary risk financing tool, enabling organizations to retain profitable layers of risk while using commercial insurance more strategically. That, he said, reflects a more sophisticated phase in the evolution of risk financing.

He added that analytics and data management have emerged as key differentiators among captive owners. Those who invest in benchmarking, predictive modeling, and performance analytics, he said, are better positioned to translate insight into improved outcomes.

Michael Jeffers, senior manager at Oliver Wyman, said social inflation remains a persistent and significant pressure on liability costs.

"Social inflation isn't going anywhere as a significant pressure on liability costs, driven in large part by nuclear verdicts and the rapid growth of third-party litigation funding," said Mr. Jeffers. "As a result, general liability, auto liability, and lead-umbrella renewals have been quite challenging this cycle: double-digit year-over-year premium hikes and capacity reductions are pushing many buyers to rethink their placement strategy. Moving more risk into a captive can materially lower the total cost of risk while preserving continuity of coverage."

With respect to letters of credit, Martin Ellis, senior vice president and manager of the global and captive insurance group at Comerica Bank, said usage continues to grow as captives secure reinsurance obligations with fronting carriers.

Mr. Ellis noted strong demand for letters of credit. "Our issued letters of credit (LOCs) have increased 13 percent this year after similar double-digit growth in each of the last few years," he said. "LOCs continue to be popular with group captives, especially when members can post an LOC from their own banks, and we consolidate those into a single LOC issued to the fronting carrier, known as a 'back-to-back' LOC. As captives expand into new lines of coverage such as cyber, business interruption, and medical stop-loss, the amount of collateral they need to post to their fronting carriers increases."

Key UK Development

On the jurisdictional front, Dan Towle, president of the Captive Insurance Companies Association, said the United Kingdom's plans to establish itself as a captive domicile represented the most significant development of the year.

"We have followed this initiative closely, submitted supportive comments during the UK consultation period, and continue to offer our counsel and support (or partnership)," said Mr. Towle. "Welcoming one of the world's most respected insurance markets into the captive space is a milestone moment, and the United Kingdom now joins a growing group of European nations that have formally recognized the importance and credibility of the captive model. This signifies a clear validation at the governmental level of the legitimacy, value, and business purpose of captives, which exemplifies an enormous achievement for our industry."

Kevin Walters, director of communications at the Tennessee Department of Commerce and Insurance, said Tennessee continued to attract business from captive owners seeking stability, building on the positive effects of its statutory modernization in 2011.

"The past 5 years have been a period of sustained growth for the Volunteer State, including 2025," said Mr. Walters. "Tennessee continues to attract captive insurance companies and managers. Twelve new pure captives and 95 new cells were licensed in Tennessee during 2024, and according to the most recent figures, Tennessee has 192 total captives and 694 active cells.

"In 2025, captive insurance continues to be a go-to for risk diversification. We have seen a modest increase in formations around medical stop-loss and cyber lines. We expect to see continued growth in those areas, among others, in 2026."

South Carolina also experienced increased application activity, primarily for pure and sponsored captives, according to Andrew Noga, captives director at the South Carolina Department of Insurance. He said these structures allow mid-market organizations to access captive benefits while supporting more targeted risk management for large corporate entities.

Commercial auto remained a prominent challenge, Mr. Noga added, including the formation of new risk retention groups to bridge gaps between trucking and large fleet risks. Collateral costs for fronting arrangements and working layer auto rates also remained pressure points.

"We have observed that many new captives are enthused by the risk management benefits provided by captive insurance," said Mr. Noga. "Healthy captives generate growth in surplus that permits more prudently retained risk or a return of excess capital to the captive owner. Well-run captives are not simply expense savings vehicles to their owners; they are a profit center too."

Travis Wegkamp, director of captive insurance at the Utah Insurance Department, said Utah's captive industry continued to experience steady growth in both formations and written premium. He highlighted particularly strong growth in sponsored cell captives, supported by regulatory changes that lowered minimum capital requirements and clarified distinctions between contractual and legally formed cells.