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Retained Risk Needs Stronger Claims Oversight
Captive insurance companies help organizations create customized risk-financing solutions for exposures that may not be fully addressed through traditional commercial insurance.
As captives grow in importance, more organizations are using them to retain risk, manage volatility, and address both traditional and emerging insurance needs. But as more risk is retained and the complexity of risks grows, captive performance depends not only on program structure and funding, but also on disciplined claims documentation, reserving, litigation management, escalation, and resolution.
Indicators Showing Why Captive Claims Governance Matters
| Indicator | Statistic | Why It Matters |
|---|---|---|
| Captive adoption is expanding | Aon reported that 22% of respondents in its 2025 Global Risk Management Survey currently had a captive or protected cell company, and another 4.1% planned to establish one within three years.1 | More companies are using captives as part of enterprise risk strategy, which increases the need for disciplined governance around retained claims. |
| Captive premium is growing | Marsh-managed captive gross written premium rose 6% in 2024 to $77 billion.2 | Growth in captive premium suggests captives are taking on larger or broader risk-financing roles, making claim outcomes more financially material. |
| Retentions are increasing | New Marsh-managed captives retained more than 55% of additional premium written in 2024, while large established captives increased retentions by 8% on average.3 | Higher retained risk increases the financial importance of reserving, litigation strategy, legal spend control, and escalation discipline. |
| Captives are expanding into more complex lines | Marsh reported growth in captive use for cyber, excess liability, property, D&O, professional indemnity, and general/public liability. Cyber premium in Marsh-managed captives grew from about $30 million five years earlier to more than $170 million in 2024.2 | Broader use creates more complex claims, more difficult coverage questions, and greater need for claim coding, trend reporting, and specialized file review. |
| Liability severity remains elevated | Marathon Strategies reported 135 nuclear verdicts in 2024, with verdicts occurring across 34 states and 77 courts.4 | While not captive-specific, higher casualty severity can affect organizations that retain liability risk through captives, especially where claims involve litigation, excess liability, auto, products liability, or public-facing operations. |
Risk Complexity Is Growing
Captives are increasingly being used for risks that do not always behave like traditional, predictable retained-loss programs. For example:
- Cyber claims may involve forensic costs, business interruption, privacy obligations, regulatory notification, vendor contracts, and reputational issues.
- AI-related claims may be coded under familiar lines such as cyber, technology E&O, EPLI, D&O, or professional liability, even when the underlying loss driver is a newer technology exposure.
- Excess liability claims may be exposed to litigation funding, adverse venues, social inflation, and nuclear-verdict risk, while Marsh data indicates that excess liability captive premium increased 24% from 2023 to 2024.
For captive owners, these examples point to a practical issue: emerging and complex claims may not be visible early if the claim file, coding, reserve review, and escalation process are not designed to identify them. A captive can give an organization more control over risk financing, but that control is weakened if the organization does not also have visibility into how retained claims are developing.
For captive owners, the goal is not only to retain risk more efficiently. It is to make sure retained claims are managed in a way that protects the captive’s financial performance, strengthens oversight, and supports long-term value.
How Companies Should Respond
As captives retain more risk and support more complex exposures, companies should treat claims execution as part of captive governance rather than a back-office process. That means regularly testing whether retained claims are being identified, documented, reserved, litigated, and resolved in a way that supports the captive's financial objectives.
Captive owners should focus on the claim activities most likely to affect financial performance, including file quality, reserve adequacy, large-loss escalation, litigation budgeting, outside counsel management, legal bill review, TPA accountability, settlement strategy, claim coding, and board-level reporting. Each area should be tested for signs of claim leakage, such as delayed severity recognition, weak documentation, inconsistent reserve rationale, defense-cost drift, slow settlement decision-making, and limited visibility into emerging exposure patterns.
How Alan Gray Can Help
Alan Gray can help captive owners evaluate whether retained claims are being managed with the same discipline applied to captive formation, funding, and risk transfer. Through independent claim file review, reserve review, litigation management assessment, legal spend analysis, TPA oversight, and governance reporting support, Alan Gray can provide practical visibility into claim quality, defense cost control, escalation practices, reserve adequacy, and loss-development concerns.
Citations
- Aon. "Captives and Cyber: From Tactical Response to Strategic Risk Optimization." Aon, 4 Nov. 2025.
- "Marsh 2025 Captive Report: Captives Retain More Risk in 2024." Captive.com, International Risk Management Institute, 1 July 2025.
- "Marsh Leans into Innovation and ART as Captive Trends Evolve." Captive Review, 24 July 2025.
- Marathon Strategies. "Corporate Verdicts Go Thermonuclear: 2025 Edition." Marathon Strategies, 9 Feb. 2026.
