What is the primary function of a captive insurance company?

The primary function of a captive insurance company is to provide insurance to its owner or a group of owners. Captive insurance is a unique form of self-insurance where a company creates its own insurance subsidiary to cover its own risks. This allows the owners to have more control over the insurance process, including the ability to tailor coverage to specific needs, manage risks more effectively, and potentially reduce costs related to traditional insurance policies.

This option reflects the fundamental concept of captives, which is to serve the insured party directly rather than functioning as a standard insurance carrier for the general public or unrelated third parties. Captives are often established by businesses seeking to better manage their risks and insurance costs, making them highly specialized in the risks associated with their own operations.