The captive insurance industry can be said to have its origins in the formation of mutuals and co-insurance companies in the 1920s and 1930s. However, the start of the real growth of the captive industry can be traced to the early 1950s and the move by parent companies, to establish their captives offshore.

The greatest stimulus to the development of captives has been the expense or lack of availability of certain types of insurance cover in the commercial market. Other considerations apply, however, and these have become so important in the minds of risk managers and finance directors that, even when commercial premium rates have been extraordinarily low, the interest in captives has been greater than ever.

Evidence of this interest is provided not only by the number of captives being formed but also by the increasing number of domiciles available for their incorporation. Long-standing domiciles, such as Bermuda, the Cayman Islands, Guernsey, the Isle of Man and Luxembourg have been joined by the likes of Vermont, the British Virgin Islands, Gibraltar and Dublin. In a move that demonstrates forcibly the emergence of captives into the mainstream of the insurance and risk management arena, the Council of Lloyd’s passed a byelaw in November 1998 permitting the establishment of captive operations at Lloyd’s.