Captive Insurance Company
What Does Captive Insurance Company Mean?
A captive insurance company is a wholly owned and controlled subsidiary established by a parent company to insure itself against specific risks to which the parent company is exposed. In addition to providing risk protection for the parent company and its clients, a captive insurance company can also benefit from the profitability of the insurance operations, allowing the parent company to reduce insurance costs and potentially retain underwriting profits.
Insuranceopedia Explains Captive Insurance Company
A captive insurance company is a form of self-insurance in which a parent company uses its own capital to establish an insurance company. This allows the company to protect itself financially while exercising greater control over its insurance coverage, including the selection of risks to insure. Companies typically choose this option because it provides cost-effective insurance solutions tailored to their budget and specific needs.
Captive insurance companies can only be created under special enabling legislation. They are often established offshore in jurisdictions like Bermuda, the Cayman Islands, Singapore, and Dubai, among others. While captives can also be formed within the United States, not all states issue licenses for captive insurance operations. The jurisdiction where a captive insurance company is established, and which has regulatory authority over it, is referred to as its domicile.
