Rated U.S. captive insurance companies reported another strong year in 2024 and continued to outpace their commercial market peers despite a 14% drop in net income, according to a new AM Best report.

The Best’s Special Report, “Captive and Alternative Risk Entities Continue to Emerge and Excel,” states that the population of AM Best-rated U.S. captives posted net income of $1.3 billion, down from $1.5 billion in the previous year. This result comes on the heels of a 51% net income increase in the previous year. Additionally, the five-year average combined ratio of 88.0 for the AM Best-rated U.S. captives outperform the 97.0 of their commercial casualty peer composite. At the same time, the U.S. captive composite has seen underwriting volatility in recent years, which led to a 9.6-percentage point deterioration on their combined ratio to 98.5 in 2024, but the segment continues to create significant savings on traditional commercial market insurance spend. Between 2019 and 2024, the captive composite added $4.6 billion to its year-end surplus while returning $2.0 billion in dividends, representing $6.6 billion in insurance cost savings that the captives retained for their own organizations by not purchasing coverage from the commercial lines market.

“There continues to be a noticeable increase in the adoption of captive insurance solutions by owners, sponsors and managers, although the pace of formations has slowed some as the hard market has gradually abated in certain lines of business, such as D&O or cyber,” said Dan Teclaw, director, AM Best. “However, overall usage of captives for new lines or coverages such as employee benefit risks or parametric contracts is still expanding, reflected by sustained year-over-year increases in premiums.”

The report states that the historical drivers of the captive composite’s outperformance of the broader commercial lines market remain unchanged and include the captives’ efficiency in managing claims and mitigating risk, their ability to control operating costs and their focused approach to underwriting. Additionally, as strategic extensions of owners’ enterprise risk management functions and as self-insurance vehicles, captives are incentivized to focus on loss control and the preservation of capital, as opposed to chasing profitability and higher rates of return.

“When risks appear overpriced or unavailable at the terms and conditions a company may need, captives have the flexibility to step in and customize if they have appropriate capital support,” said Teclaw. “Although captives are not created with the intention of being profit centers for their organizations, they remain highly profitable, and AM Best would expect captives’ results will continue to be favorable in 2025.”

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=356343.

AM Best will host a market briefing on the state of the captive insurance industry on Wednesday, Aug. 6, 2025, at 3:00 p.m. EDT. Please visit the briefing page to register for the event.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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