Global reinsurance capital has climbed back above $700 billion after years of tough market conditions. This growth is driven by strong investor returns and steady inflows from insurance-linked securities. Alongside this, property catastrophe reinsurance rates have settled following sharp increases in the early 2020s, leading to more capacity and competition than risk managers have seen in recent years.
Jason Tyng, vice president and captive lead at HDI Global Insurance Company, sees this rebound as a boost for captives. Rather than becoming outdated, captives are proving their worth as flexible, long-term tools for managing risk. “The market is shaping balance sheet activity because it’s allowing captives to move things off their balance sheet,” Tyng explains.
For corporate risk managers, this means more options to shift risk, free up capital, and rethink how their captives fit into their overall financial plans. In recent cycles, many captives held onto higher layers of risk because there wasn’t enough outside capacity. Now, with plenty of capacity available, risk managers can re-enter the market and revisit their relationships.
This shift is especially important for companies new to captives. Softer reinsurance markets mean programs can be set up with less capital than before. A firm that once needed to keep $50 million in exposure to justify a captive might now use external capacity to cover severe risks, reducing the amount they have to retain.
Interest in captives remains strong despite improving market conditions. Tyng notes that boards and CFOs increasingly see captives not just as tools for tough times but as permanent parts of their financial setup. There are now over 7,000 active captives worldwide, with total premiums over $80 billion. US states like Vermont, Utah, and Delaware continue to attract new captives, while large multinational companies use them for global risk programs.
Captives offer something traditional insurance companies don’t: they’re nimble. They can adjust exposure as market cycles change, making them valuable over the long term. However, managing losses tied to severity—such as large, unexpected claims—is a bigger challenge than handling frequent smaller losses. Tyng points out that using reinsurance helps captives protect themselves from those big, costly risks.
Technology is also helping captives work smarter. Improved analytics, AI-driven claims models, and real-time exposure tracking enable better control over retentions and risks than ever before. For fronting insurers, more reinsurance capacity means less credit risk and often fewer collateral demands, which can be a sticking point in captive arrangements.
Brokers are crucial in this landscape. According to Tyng, clear communication and education are key in captive negotiations. Brokers need to deeply understand alternative risk solutions to explain strategies clearly to clients and carriers. Miscommunication often causes delays.
Looking ahead, captives owners in 2026 are focused on optimization—checking whether their current risk retentions, business lines, and capital use still make sense. Tyng likens captives to pieces of Lego that can be resized and reshaped as the market shifts. “As the market changes, you can increase your capacity here and lower it there,” he says.
Overall, captives are adapting to a world where reinsurance capacity is back, technology is advancing, and risk managers have more choices. Rather than fading away, captives remain an important part of the risk management toolbox.