Glossary

What is Captive Insurance?

A wholly owned subsidiary insurance company created by a business to insure the risks of its parent company and affiliates.

Full Definition

Captive insurance is a form of self-insurance where a company creates its own subsidiary insurance company to underwrite the risks of its parent and affiliates. Captive insurance allows businesses to retain risk more efficiently, access reinsurance markets directly, insure risks that are unavailable or overpriced in the commercial market, and potentially realize tax benefits. Single-parent captives are owned by one company; group or association captives pool risks among multiple unrelated companies. Popular domiciles include Vermont, Hawaii, and offshore jurisdictions (Bermuda, Cayman Islands). Captive formation typically makes sense for companies with $500K+ in annual premium spend.

Related Terms

Self-Insured Retention (SIR)

Surplus Lines

Risk Retention Group

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Related Coverage & Services

Self-Insured Retention (SIR)

The amount of loss the insured must pay before the insurance policy begins to respond, similar to but legally distinct from a deductible.

Surplus Lines

Insurance placed with non-admitted carriers that are not licensed in the state where the risk is located, used for hard-to-place or unusual risks.

Risk Retention Group

A liability insurance company owned by its policyholders, all of whom are in the same business or profession.

Business Insurance

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