The world of risk is rapidly evolving, presenting new challenges amid uncertainty for companies striving for long-term stability and value delivery to stakeholders. Anticipating future risks and identifying mitigation actions are crucial aspects of sound governance. For example, a multinational manufacturing company must navigate supply chain disruptions, shifting environmental regulations, geopolitical tensions, and rising costs of raw materials. All this means that leaders must proactively set policies and actions to protect their organisations, addressing both current and emerging threats to ensure resilience and sustained growth.
Captives allow for tailored coverage, enhanced cash flow management, and can transform risk management into financial gain by retaining underwriting profits. As companies seek smarter risk solutions, captives offer long-term stability and cost efficiency. Now is the time for businesses to explore these innovative solutions and take charge of their risk strategy.
Risk management in a changing world
Captives are insurance entities created by a parent organisation to cover its own risk. They offer flexibility and control, allowing companies to tailor insurance solutions to their specific needs.
Emerging and hard-to-place risks, such as cyber threats, environmental liabilities, and reputational damage, are often excluded by traditional insurers due to their unpredictable and complex nature. Captives, however, can provide coverage for these risks, offering a unique advantage in today’s dynamic risk landscape. (And if you are interested in knowing more on the broader topic, we have done a deeper dive in our blog )
One key benefit of captives is their ability to offer bespoke coverage. Traditional insurers may not have the appetite or the expertise to underwrite emerging risks, leading to exclusions and gaps in coverage. Captives, on the other hand, can be designed to address these specific risks, providing comprehensive protection that aligns with the company’s risk profile.
Moreover, captives can enhance risk management practices. By internalising the insurance function, companies gain deeper insights into their risk exposures and can implement more effective mitigation strategies. This proactive approach not only improves resilience but also drives operational efficiencies and cost savings.
Financial benefits are another compelling reason for the use of captives. They enable companies to retain underwriting profits and to invest them, potentially generating capital and significant investment returns. Additionally, captives can offer tax efficiencies and reduce insurance costs by eliminating the need for commercial insurer profit margins.
Captives: Covering emerging & hard-to-place risks PwC Luxembourg
Governance is a critical aspect of managing a captive, requiring strong oversight and compliance with regulatory requirements. A well-managed captive can serve as a powerful tool for risk management, leveraging its unique capabilities to cover emerging and hard-to-place risks.
With rising insurance costs, capacity restrictions, and emerging risks (i.e. cyber, geopolitical, and ESG liabilities), businesses are rethinking their risk management strategies and increasingly looking for alternatives to traditional insurance. More companies are turning to captive (re) insurance to take control of their risk financing, build resilience, and reduce reliance on unpredictable commercial markets.
Want to know more? Read our , published in March 2025.
Captives: Covering emerging & hard-to-place risks PwC Luxembourg