A Captive is an insurance company that insures the risks of its parent, shareholders, or affiliated companies. Your captive issues insurance policies, collects premiums, and pays claims. All captives should be used to manage risk. In addition to that, captives may be used in many different ways and for many different reasons.
A Captive is a formalized form of self-insurance. Over half of all premiums collected in the US are now in alternative vehicles (like Captives) rather than the traditional market.
The Captive Insurance Company solution has long been utilized by some of the largest companies in the United States. Congress has enacted tax incentives to encourage the formation of captives for the small and medium sized business market. At its core, a Captive Insurance Company is a wholly owned company that insures the risks of companies affiliated with the shareholders of the captive. The Captive Insurance Company may also offer other planning benefits.