What is a Captive Insurance Company?

Captive insurance companies are insurance companies that are owned and controlled by their insureds. A captive insurance company is described as single parent captive if it is owned and controlled by one company and insures that company and/or its subsidiaries.

A group captive is an insurance company owned and controlled by two or more non-affiliated organizations the captive insures.

A group captive can be either homogeneous and insure similar types of businesses risks or non-homogeneous and insure risks of several types of organizations. In the U.S., group captives are licensed by a domiciliary state and use a fronting carrier, or they operate under the Federal Liability Risk Retention Act of 1986. The companies may be either stock, reciprocal or mutual in organizational form.

In theory, all mutual insurance companies are captives that are controlled by their policyholders. Although not formally recognized by many as being part of the captive insurance community in the U.S., intergovernmental insurance pools are captives owned by the public agencies they insure. Most are not subject to the more extensive state regulations that are imposed by captive insurers.

There are estimates that the number of captives in the world exceeds 4,000.