A insurer (or “captive”) is a special-purpose insurance company formed primarily to the risks of its parent or affiliated groups. It is quite similar to a traditional, commercial insurance company in that it is licensed as an insurance company, it sets insurance-premium rates for the risks it chooses to underwrite, writes policies for the risks it insures, collects premiums and pays out claims made against those policies.
The biggest difference between a captive insurer and a commercial insurance company is that a captive cannot sell insurance to the general public. It can only underwrite the risks of its parent organization or related entities. Another key difference is that the governing captive insurance companies are typically less onerous than those regulations governing traditional commercial carriers.
- How Does a Captive Insurance Company Work?
- How Does a Captive Insurance Company Differ from Traditional Coverage?
- Why Would a Business Consider a Captive Insurance Company?
- What Type of Coverage Should Be Written In a Captive?
- Single-parent captive
- Series LLC Captives
- Risk retention group captive
- Rental captive
- Segregated cell/protected cell captives
- Association captive insurers
- Agency captive insurers
- Special purpose vehicles (SPV)
- Clarify the objectives
- Defining the risk
- Measuring the risk
- Structuring strategy
- Domicile choice
- Operating the captive
- Writing Only Uninsured Risk
- Unsound design and questionable marketing practices
- Failing to meet relevant IRS safe harbor provisions