What is the ‘biggest constraint’ in the captive model?

The “biggest constraint” around implementing a captive is geography, with multinational businesses being “limited to licensing capabilities” of headquarter jurisdictions, rather than being able to establish a more global arrangement to cover multinational operations.

This was the consensus among a panel speaking at the Axco Global Insurance Summit on 16 April 2026 in a session entitled ‘Expert arena – captives and ART’.

A captive refers to a form of self-insurance, where an organisation creates a licensed insurance subsidiary to cover its own risks rather than buying commercial insurance policies from an insurer.

Although the session speakers agreed that more multinational businesses would be seeking to establish captives in the years to come – with this model being “more important” for very large organisations – they additionally confirmed that there was a territorial pain point in terms of global companies wanting equally global captives.

An insurer representative speaking on the panel said: “[Captives are] limited to its licensing capabilities where it is. So, [within] a multinational [insurance] programme, the client still needs local policies in territories that it can’t cover itself. That’s where the insurance market will always be involved.

“I don’t think there’s many captives out there that [are] trying to build their own [global] network.”

A risk professional panellist agreed: “For a big, global organisation, regulatory compliance needs to always be front and centre. So, while we have the ability to [have] direct and reinsurance [captives], we still need insurers to issue local policies, to make sure that we are compliant.”

Direct pricing versus reinsurance

The panellists highlighted that there are two main forms of captive that companies can implement – a “direct pricing captive with an insurance licence” or “a reinsurance captive, which is set up just to assume risk to main function companies”.

Further clarifying a reinsurance captive, a speaker continued: “The insurance company would place the insurance where it’s needed and the captive would reinsure some of that risk.”

As for the direct pricing captive option, the speaker added that these arrangements typically require more capital, as well as a “bigger staff” including “support functions” such as actuarial and underwriting. The insurance licence held by this type of captive will also “depend [on] where that captive is based”.

The expert panellists noted that insurers still had an active role to play in successful captives and they debated what fronting insurers needed to bring to the table in order to support risk managers.

One speaker identified important insurer traits as being “flexibility”, having “an extensive network that aligns the footprint of the organisation” and operating “embedded processes within their own organisation that enables the programme to be run quite efficiently”.

She continued: “Multinational programmes are administrative heavy and as a buyer, we don’t want to chase things up. We just want the machine to work efficiently [and] effectively.

“Technology has got a huge opportunity here to improve that process for fronting arrangements.”

The panellists agreed that insurers had to prepare for more captives to hit risk management strategies and recognise that there was appetite for these captives to be implemented across different jurisdictions.