A captive insurance company is a separate entity used to absorb and manage defined risks within a corporate group.
Coverage intent
Captives can reduce premium leakage, improve claims coordination, and align risk financing with corporate risk tolerance.
Underwriting and policy mechanics
Key design choices include capitalization level, covered classes, reinsurance treaties, and governance standards required by regulation.
Claims logic
Claims may be paid from captive reserves and then reinsured for catastrophic excess. Corporate service quality and claim consistency are central to pricing and capital planning.
Practical question
Is a captive a replacement for primary commercial coverage?
Usually not. Many captives sit above or beside a commercial program with retention and financing roles.