The volatile economic and market landscape can lend itself to a more active approach to investment strategies for captive insurers, according to London & Capital’s Chris Dalziel and James Mee.

Captive insurers are traditionally conservative investors, with many not investing at all and instead loaning funds back to the parent group’s treasury function.

Managing an insurance company’s balance sheet brings its own considerations concerning solvency, regulatory risk, accounting and funding claims reserves.

On the latest episode of the Global Captive Podcast, which assesses the impact of President Donald Trump’s tariff strategy to date and how captive’s should think about their own investment decisions as a result, executive director Chris Dalziel was joined by colleague James Mee, co-head of multi-asset strategies.

London & Capital, which will be rebranded next month as W1M and works with captive insurers in multiple jurisdictions in Europe, the United States and offshore, takes a global and active approach to its investment strategies.

Mee said the active approach can be particularly beneficial in periods of market volatility such as the one we find ourselves now, in 2025.

“Historically, in periods following peak equity market valuations – open question, and very much a live debate whether we have seen this – but in periods following that and, in particular, where equity markets are very concentrated, which they very clearly were at the back end of last year, the subsequent period generally is a very fruitful one for active management, talking to equities in particular,” he said.

“I think that’s particularly relevant here, when you take the view that American exceptionalism, as it’s been coined, is being challenged. Certainly, there’s a debate about it today, which there wasn’t even 12 months ago.

“It’s too soon to say which way it’s going to fall, but there are challenges for sure. Opportunities are abound from a market landscape perspective as well.”

Dalziel highlighted the specific considerations that captive insurers have to take when assessing an investment strategy and balancing risks that fit into three categories – investment/economic risk, regulatory risk and accounting risk.

“Something does have to give along the way,” he explained. “And one of the real benefits of active management is it allows us really to have that discussion with our clients and create investment solutions that reflect each captive’s own priorities.

“If you’re buying an off-the-shelf passive strategy or investing in any other way, that sort of limits your range of options and you are, inevitably, sacrificing some level of control.

“And when it comes to the priorities of a captive shifting and changing… where captives are adding new lines of business, they are changing their duration profile, they are perhaps wanting to evidence to their parent company or organisation that actually they have got a good handle on the accounting and they’re not causing any other troubles within the group.

“Our experience is that when clients need to take advantage of that flexibility, they need to do that in a way that reflects those changes, and the portfolio can suitably change. That is the second order benefit, and it is relatively hard to quantify, but it is definitely there.

“It’s definitely real and it is definitely a well-used option that we see across our client base.”

Listen to the full conversation between Chris Dalziel and James Mee on the Global Captive Podcast. Listen here or on any podcast platform. Just search for ‘Global Captive Podcast’.