RISK & EXPOSURE
Captive definition
A captive is an insurance company established by a parent organisation to insure some or all of that organisation’s risks.
In practice, this means an insurance company established and owned by a parent company for the purpose of insuring the parent company’s risks. It may also write unrelated third party risks. This gives insurers, brokers, reinsurers and risk managers a shared way to discuss the concept when reviewing policies, claims, regulation or market data.
This term is especially useful in reinsurance, alternative risk transfer and risk financing. It helps users interpret insurance terminology consistently across markets, policies and risk data. It also helps users compare how insurance is structured, regulated, priced or claimed across different markets.
Captive is closely related to alternative risk transfer, fronting, reinsurance and parent company. Linking these concepts together helps build a clearer glossary structure and gives readers a stronger understanding of how individual insurance terms connect within wider international insurance practice.
At a glance
- Used in
- Reinsurance, alternative risk transfer and risk financing.
- Purpose
- Helps users interpret insurance terminology consistently across markets, policies and risk data.
- Important because
- Multinational programmes often depend on the relationship between local policies, master policies and reinsurance structures.
- Related terms
- alternative risk transfer, fronting, reinsurance and parent company.
Example of a captive in insurance
A multinational group creates a captive to insure selected risks across its subsidiaries. The captive retains part of the risk and may buy reinsurance for larger losses.