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AM Best says rated captives outperformed commercial casualty via lower ratios
AM Best estimated rated captives produced $8.2 billion in savings for parent companies from 2021 to 2025, driven by a 5-year average combined ratio of 89.1 versus 96.7 for commercial casualty peers.
AM Best says AM Best-rated U.S. captives have continued to outperform commercial casualty underwriting over the past five years, even as recent commercial results softened. The ratings agency put the captive composite’s five-year average combined ratio at 89.1, before dividends, compared with 96.7 for the commercial casualty composite.
AM Best also cited differences in operating performance, with the captive composite’s five-year average operating ratio at 78.1 versus 84.8 for commercial casualty. In the report, AM Best attributed the edge to disciplined underwriting, effective risk controls, and an emphasis on loss mitigation and capital preservation rather than profit-seeking.
AM Best estimated rated captives delivered $8.2 billion in savings to parent organizations from 2021 through 2025, split evenly between $4.1 billion in surplus growth and $4.1 billion in dividends that otherwise would have gone to the commercial market. The agency said it expects favorable captive results again in 2026, assuming no unforeseen systemic catastrophic events.
The captive market remains in growth mode, with organizations increasingly using captives as long-term risk management tools rather than temporary responses to hard markets. Vermont reported 51 new captive formations in 2025, for 707 active captives plus 36 cell captives, while Utah reported 605 total captives including cells at year-end 2025, and Delaware added 21 new captives for a total of 638. AM Best said it rates more than 220 captive companies globally, with about 70% domiciled in the U.S., and among rated U.S. captives, medical professional liability is the largest line at 38%.