PROPERTY & CASUALTY CAPTIVES

Is a P&C Insurance Captive Right for Your Business?

Let a Patriot Growth Insurance Services Expert Be Your Guide

In today’s challenging insurance market, businesses are exploring creative alternatives to traditional coverage and one solution gaining momentum is a property & casualty (P&C) insurance captive.

A captive is a licensed insurance company formed by a business, or group of businesses, to insure their own risks. The parent company pays premiums to its captive, which then covers specified losses. While captives were once reserved for large corporations, evolving cost structures, and turnkey management solutions have made them accessible to mid-sized firms as well.

Why Captives Are Gaining Ground

Several converging factors are driving increased interest in captives:

• A surge in catastrophic events: From hurricanes to wildfires, billion-dollar disasters in the U.S. have jumped from an annual average of 5 (1980–2009) to 23 in the past five years.
• Weakened insurer investment returns, especially in bond markets, which traditionally make up over 60% of carrier portfolios.
• Inflation and labor shortages have significantly raised the cost of repairs and replacements.
• Rising litigation trends: U.S. commercial casualty losses grew 11% annually between 2018–2023, reaching $143 billion, per Swiss Re.
• Premium hikes: Direct P&C premiums have risen 35% over the past five years. Insurers are also raising deductibles and pulling back from high-risk regions.

As carriers become more selective, businesses are searching for more control and long-term sustainability.

What Is a Captive?

Captives are insurance companies created to insure the risks of their owners. These may be:

• Single-parent captives, serving one business, or
• Group captives, jointly owned by multiple companies – often from similar industries or with shared risk profiles.

Historically, captives required substantial capital and were only viable for firms paying $1M+ in annual premiums. But with specialized management partners now handling underwriting, claims, reinsurance, and investments, captives, especially group captives, are within reach for many mid-sized businesses.

Benefits of a Captive Structure

Captives offer several strategic advantages:

• Cost control – Reduce costs, particularly for companies with strong safety programs and low loss histories.
• Customized coverage – Greater flexibility to tailor insurance to your needs.
• Profit retention – Underwriting profits and investment income can remain within the captive.
• Tax efficiency – Premiums may be tax-deductible; reserves grow tax-deferred.

However, captives aren’t right for every business. Setup costs and regulatory requirements can be high, and the parent assumes more risk, potentially making significant losses more disruptive.

The Bottom Line

Captives offer a compelling path for companies seeking more control, potential cost savings, and strategic flexibility in their risk management approach.

If you’re considering a captive, your first step should be a conversation with an expert. At Patriot Growth Insurance Services, our experienced brokers can help determine whether a captive is right for you—or guide you toward the best alternative.

Let’s Talk: contact@patriotgis.com today!