Hard Commercial Market Conditions Continue Driving Captive Formations
September 18, 2023
With hard market conditions continuing in the traditional insurance market, captive domicile regulators say new captive insurance company formations remain at a high level.
In Vermont, the biggest US captive domicile with 656 captives, 25 new captives have been licensed so far this year, with several captive applications now being processed.
"The activity is very healthy. The hard conditions in the traditional market are a driver for new captive formations," said Sandy Bigglestone, Vermont's deputy commissioner of captive insurance in the state's Department of Financial Regulation in Montpelier.
Captive formation growth also has been strong in other domiciles. For example, in Utah, 29 captives have been licensed so far this year, bringing its total captive count to 424.
Much of that growth is due to hard conditions in the traditional market making it "difficult for finding coverage at a reasonable price or even finding coverage," said Travis Wegkamp, captive insurance director with the Utah Insurance Department in Salt Lake City.
In North Carolina, about a dozen captives have been licensed so far this year, with 12 licenses pending, said Lori Gorman, deputy commissioner of the North Carolina Department of Insurance, Captive Insurance Division, in Raleigh.
"We crossed 300 this year, and that is a great milestone for North Carolina," Ms. Gorman said. Currently, North Carolina has 305 captives.
In Montana, 31 captives have been licensed so far this year, boosting the state's captive count to 283.
"Now, more than ever, people need solutions for the rate increases and decreases in coverage availability that are plaguing the traditional marketplace. The captive industry is perfectly placed to offer the answers that so many are looking for," said Kari Leonard, chief examiner and captive insurance coordinator in the Office of the Montana Commissioner of Securities and Insurance.
In South Carolina, 10 new captives have been licensed so far this year, boosting the total captive count to 211.
"We expect to license at least 20 new captives by the end of the year," said Joe McDonald, director of captives for the South Carolina Department of Insurance in Charleston.
The growth in captive formations, Mr. McDonald said, has been driven by several factors, including hard conditions in the traditional market and the "solid relationship captive regulators in South Carolina have with the captive insurance industry."
In Tennessee, 24 captives have been licensed so far this year, bringing the state's captive count to 158.
"Much of this is due to the current hard market, and, as a result, domiciles are likely to continue seeing an increase in these programs," said Mark Weideman, director of the Tennessee Department of Commerce and Insurance's Captive Insurance Section in Nashville.
"We are seeing an increasing interest in both new captives, as well as the lines of coverage being offered in existing captives," Mr. Weideman added.
September 18, 2023