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What is a Captive?
Captive insurance organizations include
insurance companies that are owned and controlled by their insureds. A
captive insurance company is described as single parent captive
if it is owned and controlled by one company and insures that company
and/or its subsidiaries.
A group captive is an insurance company
owned and controlled by two or more non-affiliated organizations the captive
insures.
A group captive can be either homogeneous
and insure similar types of businesses risks or non-homogeneous and insure
risks of several types of organizations. In the U.S., group captives
are licensed by a domiciliary state and use a fronting carrier, or they
operate under the Federal Risk Retention Act. The companies may be either
stock, reciprocal or mutual in organizational form.
In theory, all mutual insurance companies are captives,
that are controlled by their policyholders. Although not formally recognized
by many as being part of the captive insurance community in the U.S.,
intergovernmental insurance pools are captives owned by the public
agencies they insure. Most are not subject to the more extensive state
regulations that are imposed by captive insurers. There are estimates
that the number of captives in the world exceed 3,500.
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