Specialty · Insurance Term
Captive Insurance Company
Definition
A captive insurance company is an insurer owned by the businesses it insures, set up to cover their own risks. Large owners or groups of similar businesses use captives to gain more control over coverage and costs, but captives bring regulatory, tax and capital obligations.
In Plain English
A single-parent captive insures one company and its affiliates. A group captive pools several unrelated businesses with similar risks. Captives usually buy reinsurance to protect against large losses.
Owners may use a captive to cover a self-insured retention, high deductibles, or coverages hard to find in the traditional market. Good results can come back to the owners over time; poor results fall on them too.
Captives are a risk management tool for larger, well-capitalized organizations. They require setup costs, ongoing management and regulatory compliance. Get advice from captive managers, accountants and attorneys before considering one.
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Example
Hypothetical: a group of 20 apartment owners with strong loss records forms a group captive to cover the first $250,000 of each property loss, while buying traditional insurance and reinsurance above that.
What to Watch For
- Make sure you have the capital and claim history a captive needs.
- Get independent legal, tax and accounting advice.
- Understand how losses and profits are shared among members.
- Check that lenders will accept a captive for any required coverage.
Last updated October 14, 2026 · Primesure editorial team · How We Write