A captive is a closely held insurance company whose insurance business is primarily supplied and controlled by its owners, and in which the original insureds are the principal beneficiaries. The following are some specific types of captives:
- Single Parent – The single parent captive is a wholly owned insurance company that is owned and controlled by the primary insured or its affiliates. It can be organized in any jurisdiction with captive insurance statute. Other names: Wholly Owned Captive, Equity Captive.
- Sponsored– Sponsored captives are typically established and capitalized by a third party (sponsor) such as a captive manager, consultant, insurer or investor. The sponsor charges a fee in exchange for providing the facility that allows the insured to reap the benefits of a single parent captive at a lower operating cost. Other names: Rent-A-Captive, Series LLC Captive, Segregated Cell Captive, Incorporated Cell Captive, Protected Cell Captive.
- Group – Group captives are owned and controlled by two or more non-affiliated organizations insured by the captive. These organizations are sometimes members of a common industry, trade association or franchise. The members of group captives share in both the insurance risk and expense, providing an avenue for smaller insureds to participate in the captive space.
- Agency – An agency captive is formed and capitalized by insurance agents or brokers to allow them to participate in high-quality risks which they control. An agency captive can be single parent, sponsored facility, or even group. Participating in risk allows the agent to enjoy the associated risk/reward potential as well as expanding coverage, capacity, price and service to their clients.
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