From: Risk Management Magazine

The captive insurance industry is evolving rapidly, poised to reach a projected $250 billion global market value by 2028. This surge among businesses seeking alternative coverage methods and cost reduction underscores the need for a comprehensive understanding of trends, challenges and opportunities. As we look ahead to 2024 and beyond, it will be helpful for businesses and investors to examine the trends and future trajectory of captive insurance market, and assess the advantages and disadvantages of captive arrangements to determine how they maybe be able to use them to navigate an ever-changing financial landscape.

Advantages and Disadvantages of Insurance Captives

The formation of an insurance captive is complex and requires careful consideration of multiple factors, including tax implications, regulatory environment and operational considerations. Before deciding whether an insurance captive is the ideal solution for a company’s risk management needs, it is important to carefully weigh its advantages and disadvantages.

One of the main advantages of forming an insurance captive is that it can reduce the amount of risk retained by the parent organization. This reduction is achieved by transferring some of its risk to a third party. Insurance captives also offer companies access to more competitive pricing options than traditional insurers while providing greater control over claims-handling processes.