About Captive Insurance Companies
A captive insurance company is an insurance company that insures or reinsures the risks of its parent, affiliates or certain unrelated entities. It is an alternative to the traditional market and is a risk management tool that can be designed to meet and/or assist in meeting the risk management needs of its owners or members.
There are numerous reasons to form a captive. Some of the most common are:
- Reduced insurance costs based on a company’s own historical loss experience
- Stabilized pricing with a more consistent year-over-year premium cost
- Freedom to insure any risk and to customize the terms and conditions of its policies
- Direct access to reinsurance markets that have fewer regulatory barriers and can provide coverage at a lower cost
- Capture underwriting profit
Your company may be a good candidate to form a captive if it has a good loss record and risk management practices, the ability to finance its own exposure, or unusual or hard-to-place risks.
The North Carolina Captive Insurance Act allows for the following types of captive insurance companies:
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