ARTICLE · 22 APRIL 2016

What's All This I Hear About Captives?

Blank Rome

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In our experience, a lawyer specializing in insurance coverage—even a whole group of insurance coverage lawyers—can practice for decades hearing the word "captive" thrown about by brokers or risk managers in large companies without being asked to address legal issues relating to a captive and without understanding what the heck a captive is or how it works

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In our experience, a lawyer specializing in insurance coverage—even a whole group of insurance coverage lawyers—can practice for decades hearing the word "captive" thrown about by brokers or risk managers in large companies without being asked to address legal issues relating to a captive and without understanding what the heck a captive is or how it works. The National Association of Insurance Commissioners ("NAIC") and the Center for Insurance Policy Research define a captive as "an insurance company created and wholly owned by one or more non-insurance companies to insure the risks of its owner (or owners)."¹ So at its core, a "pure" captive is a quasi-insurance company set up and funded by a business to serve as a form of self-insurance.

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