A captive insurance company is a controlled subsidiary that funds risks of the corporate group, e.g., workers compensation, third party liabilities, employee benefits, property, product recall, extended warranty and many other lines of business. A captive insurance company may be organized in one of the 30+ states (and D.C.) that have enacted favorable laws, as well as in offshore jurisdictions such as Bermuda or the Cayman Islands.
In addition to replacing or supplementing over-priced or hard-to-find commercial insurance, a captive can save on insurance costs for a host of reasons. Captives are a savings tool for harmonizing risk management and claims processing activities globally. They gain access to the commercial (wholesale) reinsurance market. Decisions on investing the captiveâ€™s assets remain with the parent.