The captive insurance definition is generally accepted as a group of business owners who want to come together to form an insurance group to provide coverage for themselves. This is similar to self-insuring and can allow the owners of the captive to keep the underwriting profits and the income from their investment.
Types of Captives
There are different kinds of captives and each has its own benefits.
A Pure Captive or Single-Parent Captive
In this scenario, the captive is owned by a single company. That company is providing coverage for itself and any affiliates it may have.
Protected Cell Captives
Each member in a protected cell captive is separated legally. Generally, this type of group can have a lower set up cost and lower cost to maintain.
A rent-a-captive is exactly what it sounds like. A separate party owns the captive and business owners then rent coverage as they need it. This is often the starting point for a group to eventually form a captive insurance group of their own.
Agency and association captives and risk retention groups are several other options a business owner has when deciding which captive is right for their business’ needs and goals.
The captive insurance definition is diverse. There are many benefits to this type of insurance coverage, and, it often provides a more cost-effective solution to business owners looking for alternatives to the traditional insurance market.