2026 MARKET TRENDS

Captives

Key Takeaways

Captives are gaining momentum as flexible, strategic tools for businesses to manage evolving risks in a challenging insurance market
Rising costs and hardening conditions are prompting organizations to use captives for coverages, including property, liability and cyber
A fundamental shift continues with the way middle-market companies view risk, enhancing captive utilization
Proactive planning, like conducting feasibility studies and engaging leadership, helps strengthen long-term risk management and enterprise control

Captives have gained momentum as a versatile tool for both risk retention and transfer, with their applications now reaching beyond traditional areas into property, excess liability and innovative, revenue-generating programs.

Overview

Captives continue to offer businesses a strategic alternative to the challenges of the commercial insurance market by providing greater flexibility and control over risk. In addition, more businesses are looking to captives to manage claims and realign their risk strategy. This strategic shift is not just about immediate cost savings; it reflects a deeper understanding of how captives serve an enterprise over the long term.

The captive insurance market is growing in response to a hard market in certain industry segments, fueled by economic pressures, rising costs and the need for flexible risk management solutions. Even as some commercial insurance premiums ease, businesses remain challenged by rising healthcare costs, legal verdicts, cyber threats and climate-driven exposures.

As a result, captives have gained momentum as a versatile tool for both risk retention and transfer, with their applications now reaching beyond traditional areas into property, excess liability and innovative, revenue-generating programs. This expanding use of captives highlights a growing recognition of their value as a strategic asset — helping organizations optimize risk financing and maintain control in today’s uncertain environment.

Market Conditions

Hardening conditions currently define the market in certain segments, driven by a challenging environment for insurance buyers. Pricing continues to rise while capacity remains limited at times, specifically impacting industries such as transportation, healthcare and construction. These conditions stem directly from negative claim experiences fueled by nuclear verdicts, social inflation and third-party liability funding.

In response to this adverse market environment, captive growth accelerates. Looking ahead, Brown & Brown does not expect material changes in these conditions in 2026. However, a fundamental shift is occurring in how mid-market business owners view risk. We now see more organizations understanding the long-term value of having a captive, a strategy that extends beyond simply saving money during hard markets to becoming a core component of enterprise risk management.

Impacts & Considerations

To navigate these market dynamics effectively, consider the following strategies:

Evaluate specific coverages

Consider captives for coverages such as workers’ compensation, auto liability, general liability, excess liability and physicians’ liability/medical malpractice. If an organization has favorable risk management protocols, such as low loss experience and strong safety programs, a captive allows for better risk management with higher control and transparency.

Address property challenges

While property continues to be a challenging line to cover in a captive, solutions exist for larger entities. If a company has the scale to attract appropriate fronting and reinsurance support, they may be able to exit the commercial property insurance. At times, these entities can obtain their own AM Best rating, avoiding the need for a fronting carrier.

Close cyber gaps

Mid-market business owners increasingly use captives to help cover gaps and exclusions within commercial cyber policies. This comprehensive solution allows organizations to better manage cash flows in the event of a large loss. Some organizations even choose to exit commercial insurance and self-insure their cyber risks entirely through a captive.

Conduct a feasibility study

Request a formal feasibility study to understand how a captive can help your organization. This process often leads companies to become more serious about their risk management protocols, such as embracing technology for safety and claims.

Leverage strategic advantages

Building a captive tends to draw the attention of senior executive leadership. This higher level of oversight creates a strategic advantage for many captive owners. Sophisticated captives can eventually expand to cover property, casualty and even group medical stop loss risks.

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