A captive insurance company is an insurance company founded by a business for the purpose of self-insuring. A captive is an alternative risk financing tool that is formed primarily to insure the risks of its owners and affiliated companies. In many cases, it can lower the cost of the traditional property and casualty policies already in place, and could potentially be a tax benefit for the business.
Captives have continuously evolved in response to changing market needs. Today, there is a diverse range of captive structures available, including pure captives, group captives, agency captives, captive pools, and various cell structures and rent-a-captives. The most recent evolution is enterprise risk captives (also referred to as micro or 831(b) captives), segregated accounts/portfolio companies, protected cell companies, and risk retention and purchasing groups. These innovative structures have helped lower the financial and logistical barriers to the captive solution for many organizations, resulting in an expansion of their appeal to a much broader market.
The captive market is growing. New formations are on the rise, premium volumes are increasing and an overall market appeal is growing. Self-insurance, as part of a risk transfer strategy, is evolving to capture a greater number of risks, industries, and territories. As the level of sophistication continues to increase, captives will become an even more effective and efficient structure for managing risk.
Please contact Ben, Kerry or Ryan to learn more about how a captive insurance company could help your business.