Analysis of captive domiciles in North America, based on data from the 2023 World Domicile Update

KEY NUMBERS

2021 captives: 3183

2022 captives: 3327

2022 approvals: 330

2022 surrenders: 186

Net difference: +144

Growth rate: 4.52%

Surrender rate: 5.87%

2021 estimated premium: $94,960,000,000

2022 estimated premium: $101,920,000,000

Premium change: $6,960,000,000

2021 premium per captive: $29,833,000

2022 premium per captive: $30,634,000

North America, made up of 33 US jurisdictions plus the two Canadian provinces of British Columbia and Alberta, continued to dominate the global captive industry when it came to captive premium, captive numbers and captive formations in 2022.

Captive Review estimates that North America crossed the milestone $100 billion captive premium mark in 2022, and was at the very least was $98.1 billion based on the 27 domiciles for which we have a 2022 premium figure (covering 93.18% of all North American captives).

The 35 North American domiciles were responsible for nearly a $7 billion uptick in captive premium, making up about 80% of the estimated $8.7 billion premium increase globally.

By captive numbers the 3327 captives in 2022 made up 56.25% of all captives in the 75 global domiciles we reported on, compared to 54.97% in 2021.

And with 331 approvals this was 76.09% of all global approvals in 2022, as the continent was almost entirely responsible for the excellent net gains found in the global industry.

Outside of the six largest US domiciles by captive numbers that feature in our top ten run down, there are then another five that house over 100 captives – Arizona (162), Nevada (155), Tennessee (150), Montana (119), and the District of Columbia (108).

Nevada and Montana were two of only five states that saw their captive numbers drop in 2022, while Arizona had the biggest net increase in captives of all domiciles outside the top ten, plus added an extra $400 million in captive premium.

This moved Arizona up to $10.5 billion in premium, behind only Vermont, Bermuda, Hawaii, Luxembourg, Cayman, and Texas.

Texas only had 64 captives at the end of 2021, but still added the second highest amount of captive premium in the world, with an additional $1.3 billion taking it to $11.7 billion by the end of 2022.

It’s 13 approvals and five surrenders also achieved it 12.5% number growth in 2022 to jump above Anguilla, Turks & Caicos, and Ireland in those rankings.

The top seven domiciles for captive number growth (min 20 captives) were all US states, with Connecticut and Oklahoma taking one and two in that list with growth of 28.57% and 15.56% respectively.

For Dan Towle, president of CICA, he thinks the reason the US has been so successful in growing its captive industry in recent years is because of the comprehensive infrastructure and industry promotion by its domiciles, associations and service providers.

“The US captive market is much more mature than many other geographical regions,” says Towle. “Despite the US having its own challenges, the captive marketplace is better known and accepted by its regulatory bodies than many other regions.”

And with difficult commercial insurance market conditions facing firms last year, including unprecedented supply chain disruptions, and increasing liabilities and reputational risks, he adds it created an environment where captive insurance thrives.

“We are seeing more property, cyber risk and liability coverages being added to captives,” he says. “Some types of captives such as cell captives have seen an uptick in usage and we expect this trend to continue. Better data and evolving risk strategies are giving captives the edge in providing coverage ahead of what the commercial market can provide.”

Captive Review estimates that, on average, each North American captive was writing around $600,000 more into their captive in 2022 compared to 2021. And Towle thinks that even if another captive were not formed for the next five years, he would still expect the gross written premium to increase year-over-year, as the use of captives continues to grow with increased retentions and new lines of coverage added to the captives.

This could be significant as Towle says amid IRS scrutiny he fully expects to see more closures in the 831(b) microcaptive space, and that it is possible these closures may far outnumber how many larger captives are formed.

Nevertheless, in the mid-market, Towle says there is still a lot of room left for growth.

“We’re going to continue to see robust growth for the next few years. The mid-market has tremendous opportunities for growth,” he says. “Captives are valuable to mid-market companies in the same way they are for Fortune 500 companies and we are a long way from mid-market saturation.”