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Investopedia defines a Captive Insurance Company as “a wholly owned subsidiary
company that provides risk-mitigation services for its parent company or a group of related
companies.” A captive insurance company can form for any of the following reasons: the
parent company cannot find an outside firm to underwrite particular business risks, the
premiums paid to the captive insurer create tax savings or the policy provided is more
affordable or offers better coverage for the parent company’s risks.
For many years, only large corporations have enjoyed the many benefits of operating their own captive insurance companies. Most were established to provide coverage where insurance was unavailable or unreasonably priced. In recent years, however, smaller, closely held businesses have enjoyed the many benefits provided by captive insurance entities. Captive insurance offers attractive risk management, as well as lucrative taxplanning opportunities.
For many years, only large corporations have enjoyed the many benefits of operating their own captive insurance companies. Most were established to provide coverage where insurance was unavailable or unreasonably priced. In recent years, however, smaller, closely held businesses have enjoyed the many benefits provided by captive insurance entities. Captive insurance offers attractive risk management, as well as lucrative taxplanning opportunities.
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