The utilisation of group captives in the United States is expanding as companies look to share risk, according to Mark Benz, head of group captives at AXA XL.
Middle market insureds are most likely to look to be members of a group captive structure.
“They are typically coming out of the guaranteed cost environment where they’re sending premium to a carrier without the potential of getting anything back for good performance,” Benz told Captive Intelligence.
He said AXA XL is trying to take the top performers in those middle markets.
“What ends up happening is when they join the group captive, and they keep outperforming their loss projections, keep adding more loss control, they start getting some of those funds back in the form of dividends, and that really incentivises them to do better.”
Benz said group captives are a fast-growing trend in the US, and they used to be considered as an alternative market, “but now I would actually look at them as just another market”.
“It’s no longer people are trying to find them; they’re out there, and they’re probably $5bn to $7bn in premium.”
Captive Intelligence reported earlier this month that Captive Resources had now surpassed $4bn in annual premium going through the group captives it consults on.
Depending on the industries and the risks involved, some group captives are heterogeneous while others are homogenous.
“It’s spread across different industries, and it depends on the model they’re looking at,” Benz added.
If it’s a heterogeneous captive, they are usually diverse in their industry segments and geographic locations.
“If we are talking about a homogeneous captive, a lot of them are focused on construction, transportation, agriculture, and really those specific industries where it pays to bring together those insureds and bring them in one room,” he said.
Benz said the benefit of a group captive for these companies is that they can talk about their issues and what they’re seeing, in addition to focusing on loss control and risk control mitigation techniques.
“This helps the board meeting flow better in some circumstances,” he said. “The heterogeneous captive also gives insight from all the other markets, so clients do get to pick up something there too, if they are an insured in a heterogeneous captive.”