As is our annual tradition, members of CIC Services, LLC attended the Captive Insurance Companies Association (CICA) International Conference in Scottsdale, Arizona March 6-8, 2016. CICA is the world’s largest domicile neutral captive insurance association. The conference includes a strong legal and regulatory update, covers trends in the industry, and provides excellent case studies for the formation and operation of captive insurance companies. The conference also places significant emphasis on Enterprise Risk Management (ERM).
At the conference CAPTIVE REVIEW released its stats for 2015. The industry experienced roughly 4% growth in new licensed captive insurance companies, bringing the official total to 6,408. There were 640 new licenses worldwide in 2015, but 393 licenses were surrendered. Hence, the industry added 247 licensed captives in 2015. This surrender rate is not uncommon as many captives shut down operations, depending on changes in company direction, changes in risk management strategy, needs of the business or needs of the business owners.
Note the use of the term “licensed captives” above. Industry growth was likely higher, but CAPTIVE REVIEW does not count individual captive cells. There is debate in the industry about whether cells should or should not be counted. Many domiciles report cells to “pump up” their growth numbers, according to CAPTIVE REVIEW. According to CAPTIVE REVIEW there are 2,610 individual cells. If cells were included, there would be approximately 9,000 captives or “risk bearing entities” as some domiciles call them.
While this growth rate is steady, it is not staggering. This suggests the industry is healthy and growing at a reasonable pace, allowing domicile regulators to ensure new captives have a legitimate business purpose. There is still tremendous room for growth. Business statistics suggest that as many as 300,000 U.S. businesses would benefit from owning their own insurance company. If you are one of those businesses, give me a call to discuss whether captive ownership is right for your business.