From alternative to essential: how captives are enhancing business resilience in a riskier world

By Nina Arquint and Philipp Lürzer

From rising climate-related losses to the growing frequency of cyber events and the emergence of hard-to-insure liabilities like PFAS chemicals, the pressure on traditional insurance structures is intensifying. This is prompting risk managers to take a more integrated approach by combining risk retention, data insights and long-term planning. Captives are playing an increasingly important role in this shift.

A shifting risk landscape: complexity, capacity and control

The global risk environment is marked by interconnectivity, severity and increasing insured losses. For example, Swiss Re Institute recently forecast that global insured losses from natural catastrophes may reach as much as USD 145 billion in 2025, driven by climate change, urbanisation and asset concentration. But climate-related perils are just one part of a broader picture.

Geopolitical uncertainty and supply chain disruptions are raising serious challenges for risk transfer. In some areas, insurance capacity is limited or terms are tightening; in others, quantification remains difficult due to data scarcity or model uncertainty particularly for new emerging risks such as cyber threats.

At the same time, many organisations are navigating fragmented exposure data across regions and business units. Without a consolidated view, risk managers face delays in identifying accumulation hotspots or comparing limits to loss histories. These gaps hinder effective mitigation and programme design.

Digitisation is beginning to reshape this landscape. Tools such as digital twins, climate scenario models and integrated risk data platforms are enabling companies to build dynamic exposure profiles and stress test scenarios across multiple perils. Alongside these tools, advancements in analytics and AI are improving capabilities in underwriting, wording optimisation and claims analysis. For captives, these developments open up new ways to enhance decision-making and risk governance.

Captive trends: expanding scope and strategic relevance

Captives are increasingly supporting broader goals such as capital efficiency, resilience and risk strategy. Their use is expanding across sectors as many corporates are adopting a "captive-first" mindset.

Key developments include:

• Sustained growth in captive formations: Even in soft markets captives are being used as core tools in long-term risk strategies.

• Line of business diversification: While many captives have roots in property programmes, their role is broadening to include cyber, D&O, environmental liability, employee benefits and even risks linked to the climate transition or reputation.

• Emerging domiciles: In Europe, France implemented a dedicated captive regime in 2023, which has since led to a steady increase in local captive formations. In the UK, the government confirmed the introduction of a captive framework only a few weeks ago, marking a significant step toward improving onshore accessibility for UK-based companies. These changes open new opportunities to establish captives closer to home.

• Evolving protection strategies: As captive programmes mature, many organisations are increasing the share of risk ceded into the captive – lowering local retentions or using more fronting capacity to centralise risk at the group level. This approach allows captives to build a more diversified portfolio and actively manage retained risk. To shield balance sheets, many turn to multi-line, multi-year (MLMY) structures, which offer efficient risk pooling, improved capital planning and greater stability across insurance cycles.

Captives often evolve in stages. Corporates sometimes start with a virtual captive, a contractual arrangement that offers a flexible entry into alternative risk financing without creating or capitalising a regulated entity. As experience grows, companies may take on short-tail risks like property via structured reinsurance (e.g. stop-loss). This is followed by broader risk integration, i.e. gradually underwriting more lines of business by the captive.

Mature captives may support commercial objectives by underwriting warranties or services. At a later stage, some expand to insure third parties, enabling greater diversification and strategic flexibility. Thanks to their sophisticated risk management approach and technical expertise, captives are also frequent incubators for innovation in insurance structures.

This evolution reflects a maturing view of the captive – not just as a funding vehicle, but as a platform to embed risk intelligence into decision-making, incubate risks to enable data-led insights, promote accountability, and adapt dynamically to changing exposures.

Conclusion: captives as evolving enablers of resilience

Captives are not one-size-fits-all. Their structure, use and maturity vary significantly across organisations. But their trajectory is unmistakable: as companies face rising volatility, sharper scrutiny of risk governance, and increased pressure to respond proactively, captives are emerging as essential components of resilience strategies.

For UK-based risk managers and insurance buyers, this shift offers an opportunity: to revisit how captives are structured, what risks they address and how they can support long-term value creation. With the right design, governance, and insight, a captive can do far more than just absorb risk – it can help shape the risk strategy itself.

Nina Arquint is the CEO for the UK & Ireland at Swiss Re Corporate Solutions

Philipp Lürzer is the Captive Centre of Excellence Manager at Swiss Re Corporate Solutions

Swiss Re Corporate Solutions is the commercial insurance arm of the Swiss Re Group, and it supports clients across their captive lifecycle – from structuring and risk analytics to advanced balance sheet protection strategies. Learn more: corporatesolutions.swissre.com/alternative-risk-transfer/captive-solutions.html