What is an example of a captive insurance company?

For example, British Petroleum wisely set up a captive insurance company (Jupiter Insurance Ltd.) to provide environmental insurance to its operating units, and the moneys from its captive were used to fund in substantial part the Gulf cleanup.

What are the two major types of captive insurance companies?

Captive insurance companies can take a number of different forms. However, the most common types are single-parent captives and group captives. A single-parent captive, also known as a pure captive, is owned and controlled by one organization and formed as a subsidiary of that organization.

What type of insurance is captive insurance?

Defining Captive Insurance. A captive is a licensed insurance company fully owned and controlled by its insureds – a type of “self-insurance.” Instead of paying to use a commercial insurer’s money, the owner invests their own capital and resources, assuming a portion of the risk.

Who owns captive insurance companies?

A captive insurance company is a legally sanctioned insurance company directly formed, owned and controlled by the parent it insures. The goal of the captive is to provide the parent organization with greater flexibility and control over its own risk financing objectives and its insurance and claims costs.

What are captive companies?

A captive finance company is a wholly-owned subsidiary that finances retail purchases from the parent firm. They range from mid-sized entities to giant firms depending on the size of the parent company.

How many types of captive insurance are there?

If you are considering using a captive insurance structure for your business, you will need to determine which of the three types of captive insurance programs makes the most sense for your business: Single-Parent Structure, Group Captive (Risk Retention Group) Structure, or a Protected Cell Captive Structure.

Why is it called captive insurance?

Issue: In its simplest form, a captive is a wholly owned subsidiary created to provide insurance to its non-insurance parent company (or companies). Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured.

Why do companies use captive insurance?

A captive insurance company represents an option for many corporations and groups that want to take financial control and manage risks by underwriting their own insurance rather than paying premiums to third-party insurers. The advantages of going captive are: Coverage tailored to meet your needs.

How do captive insurance companies make money?

Earn investment income: Captives can earn investment income on their loss and unearned premium reserves. A guaranteed cost policy purchased from a commercial insurer would not provide this additional income to the insured.

What is a mutual captive insurance company?

A captive insurance company is a wholly owned subsidiary insurer that provides risk mitigation services for its parent company or related entities. The potential benefits of having a captive insurance company include lower insurance costs, tax advantages, underwriting profits, and greater control over coverage.

What is a single-parent captive insurance company?

A single-parent captive or pure captive is owned and controlled by one parent and insures the risks of the parent company and its affiliates. The captive operates as an insurer for its parent company or group, underwriting all or a portion of the risks of its owners.

What are captive accounts?

Captive Account means the account maintained by the Company with The Bank of N. T. Butterfield & Son Limited in Bermuda, which account is identified as Segregated Account PP72022, a segregated account pursuant to the Universal Re-Insurance Company Act 1999, a Private Act of the Bermuda Legislature.

How are captive insurance companies structured?

Basically, a parent company retains the cost of insurance coverage through the captive instead of paying premiums to a third-party insurer for commercial insurance. Said another way: A captive is an insurance company owned by the organization (or organizations) that it insures.

What is rent a captive insurance?

The Rent-A-Captive Option. A rent-a-captive allows organizations to obtain the benefits of a captive insurance company, without the upfront costs, capital investment and significant maintenance cost associated with forming and managing an owned captive.

What is a single cell captive?

Cell Captives are entities consisting of a core and an indefinite number of cell entities which are kept legally separate from each other. Each cell has dedicated assets and liabilities ascribed to it, and the assets of an individual cell cannot be used to meet the liabilities of any other cell.

Why is it called captive insurance?

Issue: In its simplest form, a captive is a wholly owned subsidiary created to provide insurance to its non-insurance parent company (or companies). Captives are essentially a form of self-insurance whereby the insurer is owned wholly by the insured.

Is captive insurance the same as reinsurance?

A direct writing insurer issues insurance policies to its insureds. A captive insurer operating as a direct insurer insures the risks of the group and purchases reinsurance on the commercial reinsurance market. This reinsurance is not designed to deal with high-frequency or low-severity loss occurrences.