A single-parent is a separate legal entity formed as a subsidiary of another legal entity referred to as the “parent”. The captive is formed to insure the risks of its parent and parent-affiliated companies. If appropriately licensed and , a single-parent captive may also insure the risks of third parties.
The capital required to form and operate a single-parent captive is provided by the parent. The parent will maintain complete control over terms, policy language, decisions and investment policy.
Single-parent captives are often referred to as “pure” captives, but the two concepts are not synonymous. A pure captive is typically defined by as either a single-parent captive or a group-owned captive that underwrites the risks of the owner(s) only (with limited exceptions). Some characterize pure captives as captives that do not have a commercial purpose. That is, they do not operate to make profit selling insurance to insureds unrelated to the owner(s).