European captive insurance companies maintained steady ratings through 2024 and into 2025 despite a volatile global risk landscape, according to a report by AM Best.
All European captives rated by AM Best had their ratings affirmed and outlooks maintained over the last rating cycle, demonstrating the sector’s resilience as a cost-effective risk management tool for parent companies.
The report revealed significant shifts in European captive domiciles. Guernsey and Luxembourg tied for the largest number of captives with 197 each in 2024, though both mature markets saw mixed results. Guernsey registered 10 new captives but 17 surrenders for a net decline of seven entities, while Luxembourg added seven new formations with five losses for a net growth of two entities.
France achieved the highest net captive growth with five new formations and no closures. The country has expanded rapidly since introducing new regulations at the end of 2022 that incentivized local groups to form captives. Five new licenses were added in 2024, including AssuraPoste Re, CDA Reinsurance, and Orange Réassurance, with additional licenses granted by April 2025.
The United Kingdom announced plans to establish itself as an emerging captive insurance hub. In July 2025, chancellor Rachel Reeves revealed the government would introduce a “genuinely competitive, bespoke captive insurance framework” by mid-2027 as part of post-Brexit efforts to boost financial services competitiveness.
The proposed framework would feature lower capital requirements, reduced fees, faster authorization processes, and lighter ongoing reporting tailored to captives’ lower-risk profiles. The government agreed to broaden the scope to allow financial services firms to establish captives for specific first-party risks, though captives would be excluded from writing compulsory lines like motor or employer’s liability on a direct basis.
Commercial insurance markets experienced rate moderation in 2025 after a hardening phase through 2024. Market capacity grew considerably, driven by strong recent earnings, leading to more competitive conditions. The commercial property segment saw rate softening, particularly for profitable accounts, with catastrophe coverage more accessible than in previous years.
Captives have expanded coverage into new product lines including directors and officers liability, trade credit, political risk, and group life insurance to enhance protection for parent groups.
The review of Solvency II, initiated by the European Commission in 2020, nears completion with amendments expected to take effect Jan. 1, 2027. The changes will allow some insurers to be classified as small and non-complex undertakings, enabling proportionality measures across reporting, governance, and other requirements.
The report showed AM Best-rated captives remained well-capitalized by both regulatory solvency requirements and Best’s Capital Adequacy Ratio.
