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Wholly-owned subsidiary company
- A captive insurance company is a wholly-owned subsidiary company created to provide insurance to a noninsurance parent company and its affiliates or to an association. Basically, captive insurance is a type of self-insurance where a company creates a subsidiary insurer to provide insurance coverage for itself.
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Feb 15, 2024 · A captive insurance company is a wholly-owned subsidiary company created to provide insurance to a noninsurance parent company and its affiliates or to an association.
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- What Is A Captive Insurance Company?
- Understanding A Captive Insurance Company
- Tax Issues of Captive Insurance Companies
- Pros and Cons of Captive Insurance
- Examples of Captive Insurance Companies
- The Bottom Line
A captive insurance company is a wholly owned subsidiary insurer formed to provide risk mitigation services for its parent companyor related entities. Companies form “captives” for various reasons, such as when: 1. The parent company cannot find a suitable outside firm to insure it against particular business risks 2. The premiumspaid to the captiv...
A captive insurance company is a form of corporate self-insurance. While there are financial benefits to creating a separate entity to provide insurance services, parent companies must consider the associated administrative and overhead costs, such as additional personnel. There are also complex compliance issues to consider. As a result, corporati...
The tax concept of a captive insurance company is relatively simple. The parent company pays insurance premiums to its captive insurance company and seeks to deduct these premiums in its home country, often a high-tax jurisdiction. Today, several U.S. states allow the formation of captive companies. The protection from tax assessment is a sought-af...
Captives can be an attractive option for companies looking for ways to manage and distribute risk, but there are advantages and disadvantages.
A well-known captive insurance company made headlines in the wake of the 2010 British Petroleum oil spill in the Gulf of Mexico. At that time, reports circulated that BP was self-insured by Guernsey, U.K.-based captive insurance company Jupiter Insurance, and BP could receive as much as $700 million in coverage from losses. British Petroleum is not...
Insurance is a significant expense for large companies. Captive insurance companies offer a way for companies to control costs, reap tax benefits, and cover risks that commercial insurance companies might be unable or unwilling to insure. While setting up a captive can be challenging, third-party captive professionals can help companies navigate th...
- Julia Kagan
Jul 1, 2021 · To begin with, it is essential to define terms. What is a captive insurance company? In the most simplistic terms, a captive insurance company is an insurance subsidiary of a noninsurance entity or parent and is owned by the insured.
A "captive insurer" is generally defined as an insurance company that is wholly owned and controlled by its insureds; its primary purpose is to insure the risks of its owners, and its insureds benefit from the captive insurer's underwriting profits.
Captive insurance is an alternative to self-insurance in which a parent group or groups create a licensed insurance company to provide coverage for itself. The main purpose of doing so is to avoid using traditional commercial insurance companies, which have volatile pricing and may not meet the specific needs of the company.
What is a Captive Insurance Company? A captive insurance company is a C-Corporation (or a legal entity taxed as a C-Corporation) created for the purpose of writing property and casualty insurance to a relatively small group of insureds.
Jul 30, 2021 · Basically, a parent company retains the cost of insurance coverage through the captive instead of paying premiums to a third-party insurer for commercial insurance. Said another way: A captive is an insurance company owned by the organization (or organizations) that it insures.
