What Is a Captive Insurance Company?

A captive insurance company is a licensed insurer created primarily to finance the risks of its parent, affiliates, members, participants or certain unrelated entities. Captives are an alternative risk financing mechanism used by organizations seeking greater control over their insurance and risk management programs, offering benefits like tailored coverage, improved cash flow, and reduced operating costs.

Some of the most common reasons for companies to use captives are:

• Risk financing stability and ability to finance hard-to-place risks
• Tailored coverage
• Access to reinsurance markets
• Improved risk management
• Potential long-term cost control