Captive Insurance  

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Captive Insurance Company - An insurance company subsidiary designed to cover the risks of its parent organization(s). Single owner captives are owned by one company, whereas association captives (also know as “group” or “industry” captives are owned by and cover the risks of multiple organizations. Given capital and operating expense requirements, they are generally of interest only when applicable premiums exceed $2 million. Typically, captives retain substantial portions of each loss and then purchase reinsurance above these levels. Captives provide an alternative funding mechanism when coverage breadth or capacity in traditional insurance markets does not meet the insured’s needs.

Glossary of Insurance and Risk Management Terms, 8th ed. (Dallas, TX: Internation Risk Management Institute, Inc., 2001), 40.