From: Captive Insurance Times

The operating performance of rated US captive insurance companies exceeded that of the commercial insurance market in 2020, according to a new A.M. Best report.

The market segment report attributes this performance to COVID-19 market conditions, which fuelled emerging areas of growth.

It also emphasises that captives’ flexibility and control in risk management, as well as strict loss control programmes, allows the structures to drive profitability and retained earnings to create value for policyholders and stakeholders, regardless of market conditions.

Despite this positive outlook, the number of US domestic captives experienced a small decrease of 2.4 per cent from 3,182 in 2019 to 3,107 in 2020. A.M. Best attributes this to fewer new formations and several closures as a result of scrutiny from the Internal Revenue Service (IRS).

In 2020, US captives rated by A.M. Best had a total pretax operating income of $942 million; although this marks a decrease from 2019’s figure of $1.01 billion, this is still considerably stronger than the commercial casualty market.