Captive Insurance

A captive insurer is an insurance or reinsurance entity established and owned, directly or indirectly, by one or more commercial or financial entities, to provide insurance or reinsurance cover for risks of the entity or entities to which it belongs, or for entities connected to those entities and only a small part if any of its risk exposure is related to providing insurance or reinsurance to other parties. Some types of captive:

1. Pure: Insurer that writes only the risks of its owners and/or affiliates.
2. Captive writing connected business: Insurer that writes the risks of unaffiliated companies doing business with the insurer's owners and/or affiliates, in addition to the risks of its owners and/or affiliates.
3. Captive writing third party business: Insurer that writes unrelated, open market risks, in addition to the risks of its owners and/or affiliates.
4. Captive of insurer: Subsidiary of a commercial insurer and/or reinsurer that writes only risks assumed from its owners and/or affiliates.
5. Association captive: Insurer that is owned by a trade association or members of a common industry or trade association for the purpose of sharing risk among its members.
6. Health care captive: Any type of captive writing coverage for hospitals, health maintenance organizations or managed care companies.
7. Multi-owner captive: Insurer that is owned by two or more unrelated parties for the purpose of writing the risks of its owners and/or affiliates.
8. Long-term (or life): Any type of captive writing long term (life) business.
9. Composite: Any type of captive writing a combination of long term (life) business and general (non-life) business.
10. Rental captive: Insurer that contractually provides captive facilities for a fee to parties unrelated to the insurer's owners.
11. Agency captive: Insurer that is owned by one or more independent insurance agents to write high-quality risks that the agents control so the agents can participate in the profits generated by the business.
12. Finite: Any type of captive that writes related and/or unrelated risks involving: (i) clearly defined aggregate limits; and (ii) premiums that reflect the underwriter's anticipated investment income.
13. Captive not otherwise classified: Insurer that writes risks on a direct or reinsured basis that was formed to meet the insurance needs of its owner(s) whether it is formed under captive legislation or not.
14. Protected/Segregated cell captive: Insurer that provides captive facilities for a fee to parties unrelated to the insurer's owners. The captive is established by legislation that legally protects, or segregates, each cell's assets so that liabilities of other cells cannot attach to them.
15. Sponsored captive: Insurer that is owned by one or more insurer, reinsurer and/or captive. Each participant is unrelated to the owner(s) and insures its own risks. Each participant has its assets protected in a separate cell within the facility so that one participant never pays for the losses or expenses of any other participant.
16. Branch captive: U.S. domiciled subsidiary of an offshore captive that writes U.S. employee benefits subject to ERISA legislation for the owner of the offshore captive.
17. Risk retention group: Multi-owner captive formed under the U.S. Product Liability Risk Retention Act of 1981 or under the U.S. Federal Liability Risk Retention Act of 1986 that writes only liability risks.
18. Governmental pool: Separate, legal, non-governmental, risk-bearing entity that is formed by one or more governmental agencies and/or subdivisions for the purpose of self-insuring its risks.
19. Group self-insurance pool: Separate, legal, risk-bearing entity that is formed by a trade association, common industry or other related group for the purpose of self-insuring the risks of its members.
20. Special purpose vehicle: Any type of captive that transfers insurance and non-insurance risks into the capital markets.
21. Trust: A fiduciary relationship created by agreement in which money from individuals and/or companies is held by a trustee to satisfy the legal obligations of the individuals and/or companies to injured third party claimants.