Captive insurance companies in Bermuda, Cayman and Barbados rated by AM Best have outperformed the segment's counterparts in the commercial casualty sector, the rating agency said.
In 2018, net premiums earned by the captives surpassed $3.5bn for the first time.
The reported pre-tax income of the AM Best's rated captive composite grew by 8.3% compared to the previous year to about $1bn.
The combined ratio for the Bermuda, Cayman Islands and Barbados (BCIB) captive composite deteriorated slightly in 2018 by a percentage point to 85.2%; however, the five-year average CR of 80.8% was nearly 20 points better than the 100.4% CR posted by the BCIB captives' peers in the commercial casualty segment.
Between 2014 and 2018, BCIB captives added $2.7bn to their year-end capital and surplus and paid $1.4bn in dividends.
"This translates into nearly $4.2bn during this period either remaining with these captives or paid back to policyholders and stockholders instead of going to the commercial market," the rating agency said.
The new high-water mark in net premiums earned comes as a result of strong economic growth in the US, and companies taking on new risk opportunities such as self-funded employee health insurance programmes and cyber liability, AM Best added.
The report argued that captives are no longer are formed solely to plugs gaps in available capacity or at peaks in the market cycle. Increasingly they are seen as a way of delivering flexibility and enhanced risk financing, and a more hands-on risk management for enhanced safety, loss control and loss prevention.