Captives and Cyber: From Tactical Response to Strategic Risk Optimization

Aon's article "Captives and Cyber: From Tactical Response to Strategic Risk Optimization" outlines how organizations are increasingly integrating captives into cyber risk financing strategies, shifting them from reactive tools to core elements of enterprise risk management.

The article said that, according to Aon's 2025 Global Risk Management Survey, nearly a quarter of respondents now underwrite cyber risk through their captives, a significant increase from 1 percent in 2014, reflecting broader use of captives to manage volatility and the total cost of risk, per Aon.

According to the article, four primary use cases are emerging for cyber captives—deductible infill, program gap infill, no-insurance or incubation structures, and portfolio or alternative risk transfer strategies—showing how organizations are using captives to gain greater control and flexibility in financing risk.

There is continued momentum in captive adoption. Per the article, the survey found that 22 percent of respondents currently have a captive or protected cell company, and another 4.1 percent plan to establish one within three years, bringing total engagement to 26.1 percent.

Per the article, growth in cyber underwriting within captives is especially pronounced. Twenty-four percent of captive owners now underwrite cyber risk in 2025 compared to just 1 percent in 2014, a shift the authors said highlights cyber's transition from a niche placement to a mainstream component of captive programs.

According to Aon, global cyber insurance market growth mirrors these trends, with market size projected at $16.3 billion in 2025, compared with $15.3 billion in 2024, per the article.

The article said recent softening in the traditional cyber insurance market has made commercial placements more accessible, but advances in data, modeling, and analytics are also increasing confidence to retain cyber risk through captives and other alternative structures, according to the authors.

According to Aon, captives are also being used as a pathway to reinsurance markets, where underwriting approaches may be more flexible, and regulatory shifts in some regions have simplified captive formation and operation, per the article.

The article said the recent stabilization or slight dip in captive utilization since 2023 should not be viewed as a reversal but as a temporary response to increased competition and capacity in cyber markets.

Per the article, cyber premiums written by Aon-managed captives grew by 58 percent between 2022 and 2023, supporting the authors' view that captive participation in cyber is expected to expand as market conditions evolve.

According to the authors, this growth reflects a broader shift in how captives are being used, with organizations increasingly relying on them for enterprise-level volatility management rather than as tactical tools for high-frequency, low-severity losses.

The article said improvements in both internal and external data are enabling more comprehensive exposure assessment, allowing risk leaders to use captives as purpose-driven mechanisms for enhanced flexibility and value.

According to the article, cyber risks are now among the top 10 most common risks underwritten by captives, underscoring the rapid adoption of cyber within captive programs in recent years.

The article said evolving cyber exposures—including those linked to artificial intelligence, connected devices, and intangible assets—may create coverage gaps in traditional policies, and captives can help address these emerging needs, according to Aon.