What is a Captive Insurance Company?

Captive Insurance Companies (CICs) are insurance companies established by businesses or owners of businesses with the specific objective of insuring risks of those businesses. CICs were first established in the 1950s and have since been an integral part of the risk management portfolios of many large companies. Over 90% of Fortune 1000 companies have one or more CIC, and over half of all property and casualty premiums are written through captives.

CICs are generally more effective in managing self-insured or uninsured risks for which commercial insurance coverage is either not readily available or is cost prohibitive. They are a very effective tool to optimize and augment existing commercial policies, like insuring the deductible layers, covering exclusions, or writing excess coverage.

In addition to being a powerful risk management tool, CICs offer strategic, financial, and possible tax benefits. They also encourage a focus on a business’s risk management program by identifying currently uninsured or under-insured risks and establishing safety initiatives and best practices. As a result, reduced claims can translate directly into realized profits for the CIC.