What is a Captive?

A Captive is a wholly owned separate legal entity, providing insurance coverage for the risks of the parent and / or a limited portion of third-party risks. 

It is often used as an alternative when the parent company is unable to find suitable insurance solutions in the commercial market, when commercially available insurance premiums are prohibitively high, when the parent’s underwriting profits are of such a nature that it becomes economically advantageous to retain the risk (and subsequently the underwriting profits) or when there is a potential economic benefit by providing insurance coverage for certain third-party risks.