What is It?
A captive insurance company is a subsidiary created to provide insurance coverage for the parent company or a group of related businesses. Rather than purchasing insurance from a traditional insurer, the parent company insures its own risks through its own captive insurer.
A captive insurance company is a risk-financing tool — one that grants owners greater control (in both financial and risk management sectors) than is offered by traditional commercial insurance. Captive insurance involves setting up your own insurance company to cover risks beyond what is and can be covered under traditional commercial insurance, to create tax deductions, or to have greater control over losses, reinsurance, and costs.
With a captive insurance structure, you can make sure that your risks are written into policies as you see fit — without ambiguous or obscure wording or using terms that strongly benefit your insurer at claims time.
A captive insurance company is a wholly-owned subsidiary company created to provide insurance to a noninsurance parent company and its affiliates or to an association. It may also provide insurance to other companies that join the captive as members. Captive insurance offers a range of benefits for businesses, particularly for those with unique or complex risk management needs.
