What Is A Captive Insurance Company?

A captive is an insurance subsidiary of an organization formed to insure or reinsure the risks of its parent.

Captives have been around since the early 1900’s, often formed to provide alternative solutions to that of the conventional insurance market.

Many "household name" insurers started up as captives and gradually expanded into fully-fledged commercial insurance companies writing business for third parties as well as their parent companies – Allstate was once Sears’ captive.

Most captives though remain risk financing vehicles for corporations and high net worth individuals where the conventional insurance market is unable to provide sufficiently flexible, stable and financially attractive terms.

Captive ‘parents’ may be individuals, corporations or even associations. Many captives have been formed by groups who when pooling their risks together may obtain better coverage and terms than they could negotiate individually from a traditional insurance company.