Regional insights

Americas


Active Americas captive marketplace continues

Aon’s most recent Captive Benchmarking Survey data shows a 13% increase in insurance entities under management in the Americas between 2018-20, with this growth unsurprisingly coinciding with the challenging market conditions in the primary insurance market.

In recent years, record-breaking1 natural catastrophe events have driven substantial losses for insurers, and rate rises in many lines have followed - particularly for Property - while the wider hard market conditions have been driven by prolonged underpricing in many primary insurance lines that are now being corrected by the market.

And with another active hurricane season forecast as well as active wildfires on the US West Coast at the time of writing, it seems likely that hard market conditions will continue in property classes at least as capacity continues to contract.

Risk management budgets strained

These factors are causing many businesses to turn to their captives - or if they do not already have a captive, to initiate a captive feasibility study - with a view to making their overall risk management programs more cost-effective. Captives can help to solve some capacity and pricing issues on distressed lines, filling placement gaps that aren’t commercially available, and provide access to the reinsurance marketplace.

As well as Property lines, we are also seeing an increase in Casualty programs - including Workers’ Compensation, General Liability and Auto lines - being placed within captives. On the Auto side, this is particularly driven by the trucking industry, where Aon’s 2021 Captive Benchmarking Survey shows a significant increase in the non-aviation transportation sector.

Our data also shows a marked increase in captive Gross Written Premium between 2016 and 2020 in the healthcare sector.2 This has likely been driven by limited capacity in the commercial market. There have been large jury awards in some US states against healthcare providers, which is making some insurers skittish about writing this coverage as social inflation is generally expected to increase.

Future risk retention

As is the case across all regions according to Aon’s 2021 Captive Benchmarking Survey, more clients are using their captives to help manage Cyber liabilities. Between 2016-20, we’ve seen Gross Written Premium for this line rise by over 300% among insurance entities under our management in the Americas, and a third more organizations writing the risk.3

We are also starting to see more organizations write ESG-related risks, and we expect to see this trend continue as Environmental, Social and Governance issues are top of many Board’s agendas.

The captive market in the Americas is expected to continue to be active over the coming years amid a strong recognition among risk managers in the region that captives are effective risk management tools in terms of retention, mitigation and risk transfer.


Footnotes

1 Aon’s Weather, Climate & Catastrophe Insight — 2020 Annual Report

2 Aon's 2021 Captive Benchmarking Survey

3 Aon's 2021 Captive Benchmarking Survey

Nancy Gray Regional Managing Director, Americas

Captive and Insurance Management

Aon

Regional insights

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