Marsh Captive Solutions' 2016 Captive Benchmarking Report, analyzed 1,139 captive insurance companies (managed by Marsh globally) for benchmarking analysis. With the title, “Captive Solutions: Creating Security in an Uncertain World,” the 44-page report covers many topics from reasons to form a captive, roles captives can play, and the changing regulatory landscape. In this post, I will summarize Marsh's findings in the area of investments for captive insurance companies.
A Look Inside Captive Insurance Companies’ Investment Portfolios (2014)
Marsh recently published its 2014 Captive Benchmarking Report, analyzing 1,148 captive insurance companies (managed by Marsh globally) for benchmarking analysis. Since the credit crisis, captives that have a parent company have invested approximately one third of investments toward loans to their parent company or other intercompany investment. Prior to 2008, many more captives were invested in equities. The motivation behind intercompany investments with the parent entity or affiliates is to minimize the cost of capital employed in the captive and enhance the parent company's liquidity. Reinjection of resources to the operations of the parent company is also a side effect of the current low interest rate environment. Further, the parent company has greater control over the captive’s invested assets.