Looking back on 25 years of Captive Review

As Captive Review celebrates its 25th year in 2024, outgoing Captive Review publisher Nick Morgan picks out some of the key moments to affect the captive industry in this time.


I joined Captive Review in 2002, only a few years after its inception in 1999. The insurance landscape had radically changed in those few years, following the 9/11 terrorist attacks.

The hard market and reduced reinsurance capacity resulted in corporates searching for alternatives, and captives proved an ideal solution.

This was the first period of accelerated growth in captive numbers in the last 25 years, and Captive Review was there at the perfect time to meet the growing demand for information on this niche fi eld of insurance.

I remember visiting RIMS in San Diego and speaking to captive managers who were exhibiting, and each left California with 10+ new captive clients in the bag.

But no sooner were these dog days upon us, when the regulation gods cast a shadow on the cost of running a captive.

Sarbanes Oxley and the discussions of Solvency II were both going to significantly and adversely affect the economics of running a captive, or so many thought.

Solvency II, however, was a nugget that changed the course of Captive Review. It was Solvency II that prompted Guenter Droese to form the European Captive Insurance & Reinsurance Owners Association (ECIROA) to try and obtain a carve-out for captives and proportionality provisions.

In 2007, I launched our first captive events in Europe. Meeting with the ECIROA team, we agreed a few years later to join forces and have produced the most important event in the global captive calendar, the European Captive Forum, running next on 5-6 November 2025.

Domicile growth

Still in the early noughties, one could count the stand-out domiciles on one hand. In the US, Vermont and Hawaii lead the pack by some distance, but as the decade progressed, US state after US state started driving their own captive economies.

The likes of South Carolina, DC and Delaware started to become increasingly popular. The domicile landscape had permanently changed; there was political, social and regulatory pressure – with too many captives ignoring the self-procurement tax.

Despite the wealth of knowledge and experience from the likes of Bermuda and Cayman, both of which remain in the top three domiciles globally, there was a surge in US onshore formations.

Today, we see 21 US states with active captive industries, all of which saw growth in 2023 in either numbers, premium or both.

The growth in captives and active domiciles prompted us to launch our data product, the unfortunately named CRADD (later changed to CID) in 2006.

CID picked up where AM Best had once trodden but had ceased to update, and listed each domicile’s captives, their type, parent company, management firm and detailed information on the domiciles.

A move back to getting enhanced data is certainly in demand and a key project for 2024.

Financial crisis

The 2008 financial crisis affected almost everyone’s life, and captives were no exception. The initial slowdown in captive formations was, however, followed by innovative thinking to widen the net of opportunity beyond the major corporates.

The use of risk retention groups, cell captives, homogenous and heterogenous group structures and, of course, the rocky road of the so-called micro-captives taking 831(b) tax elections, was seen to provide continuous growth over 10 years.

But these 10 years were not plain sailing, as implemented regulations continued to see the cost of running a captive increase and appetite to form a new captive diminish.

Dodd-Frank, FATCA, Beps and Solvency II all played their role, as did the high-profile cases of Microsoft paying its premium taxes to Washington state, and Johnson & Johnson losing its $56m refund claim in the Tax Court.

Increasing operating costs, greater regulation and micro-captives appearing on the IRS’s Dirty Dozen list all fed into the captive slowdown leading up to the end of 2017.

But perhaps the main issue was the softened insurance market. Insurance firms had become uber competitive to bring premiums on board, often releasing cash from their balance sheets to fund the premium growth.

Pendulum swings

When the pendulum finally had to swing in the other direction, the market started to move. The pace in which it hardened picked up as underwriters changed their approach.

They increasingly focused on profitable lines and ceased writing lines which didn’t fi t that bill. All this started to happen before the Covid pandemic, but this created the perfect storm and many lines were considered to be in distress.

Property, directors’ and officers’, cyber and liability were some of the most affected lines, while food and beverage, industrial and retail were the worst sectors.

It is at these crisis points that captives historically stand tall and flex their capabilities. This time, however, it felt like there was a fundamental shift in the perspective of where a captive fits into the corporate’s strategy.

A captive, like the proverbial dog, is not just for Christmas. We’ve seen strong numbers of new captive formations across the spectrum in the last four years, despite the standard number of surrenders.

But the real measure of growth has been seen in the volume of premium over the years. Corporates are adding lines, increasing their cover, taking on retentions and becoming stable financial tools for the corporate board to finally take notice of.

We cannot deny that many risk management teams have been streamlined, just as all divisions will continue to, as the capitalists’ demand for growth ploughs on. But this hasn’t led to less innovation, fewer opportunities or a downgrade in output.

Insurtech firms have started to take notice of the captive sector, seeing how much nimbler they can operate compared to larger underwriters.

One thing I know from my time in the industry over the last 21 years is that the evolution will never die.

Captives have stamped a meaningful mark on the insurance sector over the last 25 years, although not without the bumps in the road.

Although I am leaving Captive Review, I couldn’t be prouder of what we have achieved, what we have been first to report on, first to market with and the community we have built and nurtured.

I am sure to reappear after a short break, but I know the captive market, from the owners to the advisers and the specialist outsourced service professionals, will be driving and shaping a sustainable future for this great and resilient marketplace.

12 August 2024
5-6 November 2025

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