Captive insurance companies rated by A.M. Best ended 2015 in strong form, recording pretax operating income of $1.4 billion, a 13.5% increase over 2014, according to a new A.M. Best special report.
The Best’s Special Report, titled, “U.S. Captive Insurers Benefit From Core Competencies,” states that the favorable overall results for the rated domestic captive group should continue to hold in 2016.
This view takes into consideration continued modest economic improvement, gross domestic product growth of approximately 2.5% to 3%, moderate loss cost inflation between 2% to 4% and an incremental rise in interest rates by year-end 2016.
Equally important, this view assumes a similar degree of price discipline on the part of group captives. A.M. Best believes that today’s prevailing low interest rate environment will help to keep aggressive pricing on the sideline.