What is a Captive?

A captive insurance company is an entity formed in a particular domicile primarily to insure the risks of the corporate parent and/or one or more other related entities, thereby contributing to a reduction in its parent’s long term cost of risk coverage. Captives are formed for a number of economic reasons which include, lower insurance costs, cash flow, risk retention, unavailability of coverage, risk management, access to the reinsurance market, writing unrelated risks for profits and tax minimization and deferral.

Yes. There are five different types of captive structures: Single Parent Captive, Group Captive, Association Captive, Agency Captive and Segregated Cell Captive.

It is a captive that insures the risk of its parent company and other affiliated companies.

It is a captive that insures the common risk of a group of companies in the same industry.

It is a captive that insures the risk of members of associations such as ship owners, dentists, lawyers, doctors, tradesmen.

It is a captive that is created by an insurance company to reinsure the insurance company’s insurance portfolio.

It is captive that is divided into “cells” and each cell reinsures the risk of the shareholder of the cell. The shareholder of each individual cell is protected from the liabilities incurred by other cells in the captive.