The conversation between organisations and their insurers has changed. Where clients once came asking for property, liability or motor cover, they are increasingly asking how risk financing can help achieve broader business objectives.
"From simply 'I need property insurance to cover this'," said Dan Sammons, captive manager for UK and Ireland at HDI Global, "it has evolved to: how do we tackle these things on our risk register? Whether that is ESG, supply chain protection, climate risk – insurance is being used to meet those broader objectives."
That shift, from buying insurance products to designing risk financing strategies, is one of the main reasons captives are attracting renewed attention. Another is the growing recognition that traditional insurance programmes often cover less than organisations believed.
Mike Matthews, commercial director for EMEA at Artex Risk Solutions, has spent his career helping organisations understand the difference between the risks clients think they have insured and the risks they actually have insured. The gap, in his experience, is almost always larger than they expect.
"When you do a gap analysis – here's the risk register, here's the insurance programme – you can improve the programme to a point where you still have those gaps," he said. "And where a lot of captive strategy is now becoming topical is: how can captives be used to plug those gaps?"
Those gaps are appearing in increasingly familiar places. Cyber is perhaps the clearest example. Once bundled into property damage programmes, it has increasingly been carved out into standalone policies with sub-limits and inner limits that many organisations have not fully scrutinised. The result is that risk quietly migrates back onto the balance sheet.
"There are carve-outs, sub-limits and inner limits being imposed that clients are not necessarily fully aware of," Matthews said. "So they are taking risk onto their balance sheet. I have often said that their balance sheet becomes naive capacity or innocent capacity."
Covid exposed another weakness. Organisations discovered that programmes designed around individual risks often struggled when losses crossed multiple policy lines, reinforcing that traditional insurance was not always providing the breadth of risk financing they had assumed.
For Phil McDowell, who manages multinational programmes at HDI Global, the attraction of captives is as much about alignment as it is about coverage.
When organisations participate directly in financing their own risk rather than transferring it entirely to the market, the incentives change. Claims management improves. Risk controls improve. The captive owner has a direct financial interest in performance.
"There is an agency in captives where you are getting skin in the game," McDowell said. "As organisations evolve in terms of understanding their risk better, they have got more control over how that risk is structured."
That greater control increasingly extends beyond traditional property risks. Organisations entering new industries, transforming their business models or carrying risks the market struggles to price are using captives as a way to retain, understand and develop those exposures before transferring them more widely.
"If they move into a different type of industry which is less attractive to the market," McDowell said, "by creating the captive they can insulate themselves and have more control over the pricing and the approach."
Sammons believes non-damage business interruption illustrates the point. Financial losses caused by supplier disruption or inaccessible sites often fall outside conventional insurance because historical data is limited. Captives allow organisations to price those risks using their own experience while gradually building the data needed to support wider market participation.
"These are relevant risks to a business that insurance companies struggle to understand because there is no data there to support it," Sammons said. "Whereas captive owners know their business better than we ever do. They are able to price for that risk and in doing so generate data, incubate that risk, and hopefully at some point transfer it back into the market."
Captives have traditionally been associated with large multinational organisations willing to establish and manage their own insurance subsidiaries. That is beginning to change.
Matthews believes organisations should start thinking about captives whenever one of three things changes: cost, coverage or control. Rising premiums, reduced limits, new exclusions or losing influence over claims decisions are all signals that traditional insurance may no longer provide the right answer.
Cell captives and protected cell companies are also lowering barriers to entry. Rather than creating a standalone captive, organisations can participate in structures operated by specialist providers, reducing capital requirements and administrative complexity.
"With a cell captive, because it is in a facility owned by a third party like Artex, the client has a plug-and-play solution immediately," Matthews said. "A lot of barriers that put clients off have been removed."
McDowell believes that is helping change perceptions as well as accessibility.
"It is not as complicated as it sounds," he said. "With the data we have got, the technology and the processes that have been established over the years, it quite simplifies the process."
The planned UK captive regime, expected by mid-2027, could lower those barriers further by creating a domestic domicile option for organisations that have traditionally viewed captives as an offshore solution.
