8172 / What are the different types of captives?

A single parent captive, also referred to as a “pure” captive, is a captive company with a single owner. The captive provides insurance coverage only to this parent company (or related business group). Because pure captives provide insurance coverage only within the single business group, this structure provides the greatest degree of flexibility. Pure captives are exempt from many of the regulatory requirements, such as consumer protection regulations, that are applicable to other forms of captive entities.

The term “group captive,” on the other hand, refers to a category of captives where insurance coverage is provided outside of a single business group. This category of captives includes association captives, industrial insured captives, and risk retention groups. An association captive insures the risks of companies that are members of a single organization or industry. The risk and costs associated with providing this insurance are spread among the group, and the captive is either jointly owned by the association members, or is owned by the association as a whole.

Industrial insurance captives, as the name suggests, insure the risk of an industrial insurance group. Companies included within the group must meet certain size and operational requirements.