The U.S. property/casualty insurance industry was heavily affected by record-setting catastrophe losses in 2011. While the claims had a minimal affect on the industry’s capital position, they did impact earnings. Looking forward, insurers are expected to exercise increased underwriting discipline as macroeconomic issues and low interest rates continue to negatively impact profit margins. With the challenges of a transitioning insurance marketplace, Marsh and our clients are looking at alternative program options.

In part as a result of changing market conditions, the opportunities for companies to use their existing captives and/or form new captives are likely to increase. The flexibility a captive can provide in a transitioning or hard market has the potential to benefit many organizations. It takes significant time and research to establish a captive; therefore, many organizations are currently evaluating how one might provide attractive alternatives to the traditional insurance marketplace.