Why Captive Insurance is gaining attention

For many businesses, insurance is viewed as a necessary annual expense to help them mitigate their risks, something that must be purchased, renewed, and absorbed as part of the cost of doing business.

Any firm operating in a regulated environment, such as financial advisers or solicitors, professional indemnity insurance is a condition of being able to trade. In many circumstances, the regulator dictates the level of cover that a firm must have, even where this may not be reflective of actual risk to the market.

June 10, 2026

But for firms with strong governance, disciplined risk controls, and stable claims experience, there is a growing question worth asking:

Is the traditional insurance model the only option?

Captive insurance offers an alternative approach, however, very few people know what captive insurance is, how it can benefit them, or even where to access the market.

So let us help explain.

At its core, a captive is an insurance vehicle established to insure the risks of its parent company or group. Rather than transferring all risk to the commercial market, a business retains a defined portion of that risk within a captive structure, while still accessing external insurers or reinsurers for larger or less predictable losses.

This makes captive insurance not a rejection of traditional insurance, but a more strategic way of structuring it.

Why Businesses Consider Captives

The appeal of captive insurance lies in control, flexibility, and alignment.

In the traditional market, premiums are often influenced by wider market cycles, insurer appetite, and standardised underwriting models. That can mean businesses with strong claims performance and robust risk management still pay premiums that do not fully reflect their own experience.

A captive changes that dynamic.

It can allow a business to:

• retain underwriting profit that would otherwise sit with external insurers.

• benefit from investment returns on retained premiums.

• design policy structures that better reflect the firm's actual risk profile.

• create greater consistency around claims management and decision-making0

• reduce exposure to volatility in the commercial insurance market.

• build a longer-term and more strategic approach to risk financing.

For some businesses, that creates not only potential cost efficiency, but also a closer connection between risk management performance and financial outcomes.

More Than a Tool for Large Corporates

Captive insurance has historically been associated with large multinational groups, and in many cases that remains true. However, the market has evolved.

Protected cell captive structures, in particular, have made captives more accessible to a broader range of firms. These arrangements allow businesses to participate in a ring-fenced captive facility without the cost and complexity of establishing and running a standalone insurance company.

That means captive solutions are now relevant not only to major corporates, but also to well-managed mid-sized businesses with sufficient premium spend, stable risk profiles, and a desire for greater control.

Where Captives Can Add Value

Captives tend to be most relevant where a business has:

• meaningful and recurring insurance spend

• a relatively predictable loss profile

• strong internal governance and compliance

• a long-term view of risk financing

• frustration with pricing volatility or limited flexibility in the traditional market

They can be used across a range of insurance classes, depending on the organisation and regulatory framework involved. For some firms, the immediate focus may be professional indemnity insurance. For others, it may be wider operational risks across a group.

The real value often comes from looking at insurance not just as an annual purchase, but as part of a broader capital and risk management strategy.

A Strategic Conversation, Not a One-Size-Fits-All Answer

Captive insurance is not right for every business. It requires careful feasibility analysis, actuarial input, regulatory consideration, and a realistic understanding of claims behaviour and capital requirements.

But for the right firm, it can offer something the traditional model often cannot: alignment.

Alignment between premium and risk. Alignment between claims outcomes and commercial objectives. Alignment between risk management effort and financial benefit.

That is why captive insurance is attracting growing interest. It gives firms the opportunity to rethink whether their insurance programme is simply a cost - or whether it can become a strategic asset.

Final Thought

As insurance markets continue to fluctuate, more businesses are exploring whether greater control over risk financing could deliver both operational and financial advantages.

Captive insurance is not a new concept, but it is one that deserves fresh attention.

For organisations with strong risk management disciplines and significant insurance spend, it may be time to ask whether the conventional approach is still the best fit.