What is the purpose of an insurance captive?

An insurance captive is a type of insurance company created by one or more owners that provides insurance to its parent company or other related companies. It is a way for companies to self-insure for risks that are either not insurable on the open market or too expensive to cover with traditional insurance methods. It is not redundant to traditional insurance because it covers risks that would not typically be covered by a standard insurance policy. In Washington, an insurance captive allows companies to access more competitive rates and greater control of the risk management process. An insurance captive also allows a company to create customized insurance policies tailored to its specific business needs, while simultaneously taking advantage of tax benefits related to the self-insurance process. Insurance captives can also serve as an effective form of reinsurance, which is when an insurance company purchases insurance from another insurance company. This process helps spread risk and potential future losses across multiple organizations. In conclusion, the purpose of an insurance captive in Washington is to provide the parent company or other related companies with access to customized insurance policies and greater control of the risk management process. Additionally, insurance captives can act as a form of reinsurance to spread risk and reduce potential future losses.

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What is the purpose of an insurance captive?

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