What is the purpose of an insurance captive?

An insurance captive is a form of insurance that is specifically set up so that a business can insure itself. It is an alternative to buying insurance from an outside provider. Captive insurance companies are used when a business would like to control its own risk management, meaning they want to assume a certain portion of the risk associated with their business operations. In Rhode Island, a captive insurance company is formed when a business registers with the Rhode Island Department of Business Regulation and files a registration statement with the Insurance Commissioner. The purpose of an insurance captive is to provide businesses with more certainty about their insurance costs. By assuming a certain level of risk, businesses can protect themselves financially in the event of a disaster or lawsuit. A business’s costs are determined by the risk the company assumes and not necessarily subject to the price changes that occur in the insurance market. Another purpose of an insurance captive is to produce better outcomes for businesses. By assuming some of the risk, businesses can focus on the underlying aspects of their operations. This can include planning for potential disasters or lawsuits, and setting up systems to mitigate any risk that may arise. Having the ability to control their own insurance costs can be beneficial to businesses in terms of budgeting and planning for the future. Overall, an insurance captive provides businesses with better control over their own insurance costs and a way to reduce the risk associated with their operations.

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What is the purpose of an insurance captive?

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