Captives help companies move fast: Experts

HAMILTON, Bermuda – Captives can help companies quickly navigate changes in insurance markets, whether in hard or soft markets, experts say.

The markets are changing, said Brian McNamara, head of multinational North America and global captive solutions at Allianz Commercial.

“The terminology that people are using is a transitioning market. Nobody wants to use a word that begins with ‘s,’” Mr. McNamara said.

He was speaking Tuesday during a panel session at the 2025 Bermuda Captive Conference in Hamilton. The gathering attracted approximately 500 attendees, including nearly 100 captive owners.

Global commercial insurance rates declined by about 3% in the first quarter, according to Marsh LLC. “That’s possibly accelerating in different lines of business,” Mr. McNamara said.

“From a risk manager’s point of view, if it’s cheaper to transfer the risk, you’re going to transfer it rather than keep it in the captive,” but “captives stay in existence too,” he said.

Captives are a long-term risk financing vehicle, he said. “They’ll stay, but maybe there will be less premium going into it, maybe less new lines of business going into it because it’s cheaper in the market to transfer,” Mr. McNamara said.

A well-capitalized captive provides flexibility when it comes to soft and hard market cycles, said JJ Saur, director of underwriting and risk for L&F Indemnity Ltd., the Bermuda-based professional lines group captive for the PricewaterhouseCoopers network of firms.

As the market softens, you can transfer more risk, Mr. Saur said. “If the coverage terms are more broad, if coverage is cheaper, we will likely buy more reinsurance at that point,” he said.

As the market hardens, the captive focuses on managing coverage gaps and pricing carefully, Mr. Saur said.

A core principle is to keep premiums fair, affordable and stable over the longer term, “rather than this volatility from one cycle to the next,” he said.

“We utilize our strong balance sheet to our advantage through hard market cycles by keeping premiums as close to flat as possible,” he said.

A captive can be tailored to an organization’s specific risks and adapt quickly to market changes, Rachel Roberts, senior manager of risk management at Transocean Ltd., said during another panel session.

At its May 1 renewal, Transocean didn’t think some pricing terms and conditions reflected its exposure and how it wanted to deploy its premium dollars, she said.

The company doesn’t buy reinsurance and was able to retain the risk through its captive, she said.

“We were able to use the captive in a very flexible way and in a very quick way as the insurance renewal was actual progressing, to say ‘I think it’s best for us to retain the risk at this level and then look to the market for maybe, into the excess,” she said.