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Survey Report

Insurance Marketplace Realities 2025 Spring Update – Captives

May 2, 2025

Global risk turbulence and interconnected risks underscore the need for strong risk management and financing strategies.
Captive and insurance management solutions|Cyber-Risk-Management-and-Insurance
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Key takeaway

  • Continued global turbulence and risk interconnectivity is reinforcing the importance of robust risk management and risk financing strategies.
  • While insurance market rate increases have moderated in property, there have been deteriorating results in carrier casualty books driven by social inflation and third-party litigation funding. Natural catastrophe and losses from secondary perils remain high. 
  • Rising healthcare costs and the impact of costly specialty drugs are leading to more employers using captives to manage these risks and reduce costs.
  • Interest in parametric solutions, especially concerning climate and environmental risks, remains strong, as clients seek capacity that may not be available in traditional insurance markets.
  • The resultant overall effect remains positive for captive activity and utilization remains strong.
  • Reports of new captive formations during 2024 were strong across most U.S. domiciles.
  • There is strong demand for excess casualty liability coverage among current and prospective captive sponsors. This is driven by price and capacity constraints in the commercial markets.
  • Mature captives with sufficient capital and surplus continue to utilize that capacity to manage tightness across all lines of business.
  • This is facilitated by analytics to optimize how capital is deployed in the captive
  • Captives continue to provide access to better-priced terrorism coverage through reinsurance markets and government-backed schemes, rather than having the protection directly placed in the primary market or embedded within standalone property coverages.
  • The Treasury Department and Internal Revenue Service issued final regulations making 831 (b) microcaptives less attractive due to increased scrutiny and compliance burdens. The regulations classify certain micro-captive transactions as either listed transactions or transactions of interest. These designations trigger extensive additional tax return disclosure by all the involved parties. Companies will need to carefully consider the compliance requirements and potential risks before selecting this form of risk financing strategy. This may reduce the number of microcaptives in existence as well as reduce the number of new formations in the future.
  • The key Atlantic and Caribbean domiciles of Bermuda and the Cayman Islands continue to see growth in the number of new captive insurance licenses issued.
  • Through 2024, there were 17 new captive licenses issued in Bermuda compared to 16 in the prior full year, while the total number of new licenses issued for all types of insurers was 63. For the first two months of 2025, three new captive licenses were issued and 10 insurance licenses in total.
  • As usual, there have been numerous segregated accounts (cells) formed during 2024 and into 2025, but statistics for these are not published.
  • Cayman saw 42 total new licenses issued through December 31, 2024, compared to 41 total licenses issued during 2023. Captives represent the majority of all-new licenses issued. There continues to be growth in segregated portfolios (cells), portfolio insurance companies (incorporated cells) and members in group captives, for which statistics are also not published.
  • Activity continues among insurance companies setting up internal captive reinsurers as key elements in their capital management efforts and to access reinsurance more efficiently. From a regulatory perspective, these are treated as commercial licenses rather than captives.
  • New activity is globally spread in 2025 so far, perhaps somewhat less focused on North America than in the past, but not substantially so. WTW has seen activity from the U.K., Europe, Latin America and Asia.
  • Contrary to expectations, the introduction of Bermuda’s Corporate Income Tax (CIT) regime has generated some opportunities for new captive formation, although these are rather specialized in nature. We are not aware of captives leaving Bermuda because of CIT currently.
  • Outside of captive business, there remains extensive activity relating to the formation of life and annuity reinsurance entities, both in Bermuda and Cayman, for which WTW provides insurance management services.
  • Segregated account (cell) business in Bermuda remains active. The Bermuda Monetary Authority is planning to introduce some amendments to the regulation of this business, so this may have an operational impact in late 2025 and beyond.
  • WTW manages some Side A D&O business on a funded basis through Meridian Insurance Company Limited, its cell company, and it has seen renewed interest from entities that are in or adjacent to the digital asset space and who are still stressed in commercial markets.
  • International employee benefit captives are growing in importance. Aside from the savings they may generate, they also help in creating a more diversified portfolio of risk, including premium revenue that may technically be considered third-party risk.

To read more, download the full report below.

Download

Title File Type File Size
Insurance Marketplace Realities 2025 Spring Update PDF 12.7 MB

Disclaimer

WTW hopes you found the general information provided here informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Contacts

Peter Carter
Head of Captive and Insurance Management Solutions
email Email phone +44 0 203 124 6300
Jason Palmer
Regional Head of Captive and Insurance Management Solutions, United States
email Email phone +1 802 264 9555
Paul Bailie
Regional Head of Captive and Insurance Management Solutions, Atlantic & Caribbean
email Email phone +1 441 707 0692
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