Captive Insurance

This website provides an introduction to the concept of the captive insurance company and its most popular variants.

Captive Insurance Companies
They are closely held insurance company whose insurance business is primarily supplied by and controlled by owners, and in which the original insureds are the principal beneficiaries. In other words, A captive insurance company is simply an insurance company owned by the parent that underwrites the insurance needs of the parent’s subsidiaries. The insureds have direct involvement and influence over the company’s or group’s major operations, including underwriting, claims, management policy, and investments.

Captive owners usually are multi-national corporations, associations, banks, municipalities, transportation and airline companies, power producers, public housing authorities, higher education institutions, telecommunications suppliers, shipping companies, insurance companies and manufacturers, among others.

Captive Types:

Single-Owner Captive. Also referred to as “pure captive”, insures only the risks of the owner or the owner’s subsidiary operations.

Group Captive. Is owned by multiple, non-related organizations and is designed to insure the risks of these different entities.

Association Captive. Is owned by members of a common industry or trade association in order to share the risks of that industry among its members.

Sponsored Captive. Is one that uses the capital provided by an insurer or reinsurer while providing fronted insurance coverage to discrete and usually unrelated entities. The sponsored captive can be either a licensed insurer, an authorized reinsurer, or a fronted captive insurer.

Branch Captive:
Is a unit of an existing offshore (alien) captive, currently licensed in Vermont to write employee benefit business for its owners and affiliates onshore. The branch is regulated as a pure captive, is taxed only on the branch writings and is required to use an onshore trust for the protection of US policyholders and ceding insurers.