Managing risk capital through 'Captive Insurance'
If your day-to-day affairs revolve around the world of business, perhaps you’ve been hearing a lot about an alternative strategy, a risk financing technique that not only got everyone curious but has also introduced another perspective in business asset protection in the form of what they have termed as, ‘ captive insurance .’ So what is a captive insurance and what are the roles of this alternative insurer as a substitute risk financing provider? In definition, a captive insurer is generally an insurance company that is exclusively owned and managed by its insureds—most of the time, by a parent company or a group of companies. Captive insurance can be generally divided into two main groups and they are basically distinguished by who owns and operates them. ‘Sponsored captives’ for instance are entirely maintained by an outside party that is unrelated to the insured while a ‘pure captive’ is wholly and purely owned and controlled by its insured. The latter is the m...