What is the purpose of an insurance captive?

An insurance captive is a type of insurance company which is set up to insure and protect the parent company’s liabilities and risks. It serves as a way for companies to ‘self-insure’ certain risks, particularly those that commercial insurers may not be willing to cover. In North Carolina, captives are regulated by the North Carolina Department of Insurance. The department sets forth strict guidelines for captives that must be followed in order to protect consumers. These include capital and surplus requirements, risk management practices, and requirements for sound actuarial data. The purpose of an insurance captive in North Carolina is to allow a company to lower their insurance premiums by taking on certain risks itself, and providing cover for their own liabilities and risks. Captives are not designed to replace traditional insurance policies, but to supplement them by providing cover for risks that commercial insurers are not willing or able to cover. Captives can also offer other advantages, such as reduced administrative costs and the ability to tailor insurance policies to fit the individual needs of the company. Captives may also be set up to provide funds for special projects such as executive retirement plans or other employment-related benefits. In North Carolina, insurance captives are designed to benefit both the company and its consumers. By providing cover for risks that commercial insurers may not be willing or able to cover, it helps to reduce insurance premiums and provide financial security for the company and its consumers.

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What is the purpose of an insurance captive?

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