Captive Insurance for the Healthcare Industry: Why More Providers Are Taking Control

The letter arrives on a Tuesday morning. Premium renewal. Up 12% again — for the third consecutive year. The hospital CFO sets it down and stares at the ceiling. Claims have been well-managed. Patient outcomes are strong. Staff retention is above the industry average. And yet the traditional insurance market doesn’t seem to care. It charges what it charges, keeps what it keeps, and offers almost no transparency in return. This is the reality facing healthcare providers across the globe right now — and it’s precisely why captive insurance has moved from a niche strategy to a mainstream risk management solution for hospitals, physician groups, and healthcare networks alike.

Why Healthcare Is One of the Fastest-Growing Captive Sectors

The healthcare industry carries a uniquely complex risk profile. From medical malpractice and workers’ compensation to data breaches, regulatory exposure, and emerging AI liability, the range of risks facing a modern healthcare provider is both broad and costly.

And the traditional insurance market is making it worse. Commercial insurers raised rates for nearly 30 consecutive quarters between 2018 and 2025 — roughly seven straight years of price increases. For healthcare organisations, this has translated into tighter coverage limits, higher deductibles, and in some cases, carriers exiting certain lines of coverage altogether.

The response? More healthcare providers are choosing captive insurance — forming their own licensed insurance entities to fund and manage their risks directly. According to industry research, healthcare provider captive arrangements now represent approximately 15% of the global captive insurance market, making it one of the sector’s largest and fastest-growing segments. Approximately 75% of hospitals already have some form of alternative risk management in place for their professional liability exposure.

The Four Risks Driving Healthcare Providers to Captives

Healthcare organisations are not turning to captive insurance out of curiosity — they are being pushed there by specific, measurable risk pressures:

1. Medical malpractice and nuclear verdicts — The average of the top 50 medical malpractice verdicts surged from $32 million in 2022 to an alarming $56 million in 2024, according to The Doctors Company. With juries awarding increasingly large damages and third-party litigation financing fuelling more claims, traditional malpractice premiums have become unsustainable for many providers.
2. Workers’ compensation and employee benefits — Healthcare is a physically and psychologically demanding sector. High claim volumes and escalating severity in workers’ compensation make this one of the most impactful lines for a healthcare captive to absorb.
3. Cyber liability — Hospitals and health networks are prime targets for ransomware and data breach attacks. Cyber premiums in the traditional market have risen sharply, while coverage terms have become more restrictive.
4. Capitation and value-based care risk — As healthcare systems shift from fee-for-service to value-based models, providers assume financial risk for patient health outcomes. A captive insurance structure can be specifically designed to fund these expected future losses, stabilising cash flows in ways a commercial policy cannot.

What a Healthcare Captive Actually Delivers

A well-structured captive insurance programme gives a healthcare organisation something the traditional market simply cannot: ownership of the outcome.

Cost control and transparency — Instead of paying fixed premiums to a carrier that keeps any unused funds, a captive retains the premium dollars within the organisation. Between 2019 and 2024, healthcare provider organisations using captive insurance collectively saved approximately $6.6 billion — adding $4.6 billion to reserves and returning $2 billion in dividends to owners. That is capital that stayed inside the healthcare system rather than flowing to a commercial insurer’s balance sheet.

Bespoke coverage for unique exposures — Off-the-shelf commercial policies are designed for broad market segments. A healthcare captive can be structured to cover risks that commercial insurers routinely exclude, from telemedicine liability and AI-related diagnostic errors to communicable disease exposure and capitation contract losses.

Claims data and quality improvement — One of the most underappreciated benefits of a healthcare captive is the claims intelligence it generates. When an organisation has direct visibility into its own loss data, it can identify patterns, reduce claim frequency, and feed that insight back into clinical quality improvement programmes. This is particularly powerful for large health systems where the volume of data makes predictive loss modelling viable.

Access to the reinsurance market — As licensed insurance companies, healthcare captives can access the wholesale reinsurance market, pricing and capacity that is typically unavailable to provider organisations buying directly from commercial carriers.

Single-Parent vs Group Captive: The Healthcare Choice

Healthcare providers considering captive insurance must first choose a structure. The two most common options are:

• Single-parent captives — Owned entirely by one health system or physician group, offering maximum control, full premium retention, and complete customisation. Best suited to large health networks with substantial premium volumes and in-house risk management capabilities.
• Group captives — Multiple healthcare organisations with similar risk profiles pool their resources. This is ideal for mid-sized physician groups, regional hospitals, or specialist practices that want captive benefits without the full capital burden of a standalone entity.

For many healthcare organisations, the path begins with a group captive and evolves toward a single-parent structure as the programme matures and the organisation grows.

IML, Bermuda’s specialist captive management firm with over four decades of experience, supports healthcare clients through both structures — from the initial design and formation of a captive programme through to full ongoing management, governance, and regulatory compliance.

Why Bermuda Is the Preferred Domicile for Healthcare Captives

Domicile choice matters — and for healthcare captives, Bermuda has consistently ranked as a leading jurisdiction. Its regulatory framework, administered by the Bermuda Monetary Authority (BMA), is internationally respected, provides clear guidance for captive insurers, and offers direct access to the global reinsurance market.

Bermuda’s deep experience with healthcare captives — particularly medical malpractice and workers’ compensation structures — means that legal, actuarial, and management expertise is readily available. For multinational healthcare organisations or those with complex, multi-line risk programmes, Bermuda’s sophisticated regulatory environment and proximity to major reinsurance capacity make it a compelling choice.

Conclusion

The healthcare industry is facing a perfect storm of rising claims severity, tightening commercial insurance capacity, and broadening risk exposures that commercial policies were never designed to address. Captive insurance offers healthcare providers a way out — not just a cost-saving measure, but a genuine strategic asset that returns control, transparency, and financial upside to the organisations that use it. Whether through a single-parent captive or a group structure, the healthcare organisations that move now are positioning themselves for long-term financial resilience and stronger risk management outcomes.

Are rising premiums and shrinking coverage options affecting your ability to invest in patient care and operational growth? IML has been helping healthcare and commercial organisations design, form, and manage high-performing captive insurance programmes from Bermuda since the 1970s. With bespoke solutions, world-class governance expertise, and a track record built on decades of client partnerships, IML is the management partner healthcare organisations trust when the stakes are high. Contact the IML team today to find out how a captive insurance programme could transform your organisation’s approach to risk.