The US captive insurance segment continued to generate profits and increase surplus during 2021 while outperforming commercial market peers, according to A.M. Best.
In A.M. Best’s Special Report, titled “US Captive Insurance: Stepping in Amid Capacity and Pricing Challenges,” Best said that US captives that it rates reported a strong year in 2021 with pretax operating income of $1.0 billion, down slightly from $1.1 billion in 2021.
The 5-year average combined ratio of 84.5 percent reported by A.M. Best-rated captive insurance companies was considerably better than the 99.4 percent combined ratio posted by their commercial insurance peers over the period, the rating agency said.
Year over year, the group of US captives saw a 1.8 percentage point improvement in their combined ratio to 85.4 percent, Best said. Between 2017 and 2021, the group added $4.3 billion to its year-end surplus while returning $5.8 billion in stockholder and policyholder savings, according to Best. That represented a $10.1 billion insurance cost-saving that the captives delivered for their parent organizations by not purchasing coverage from the commercial market, Best said.