What does "captive insurance" refer to?

Captive insurance refers to a strategic approach where a company creates its own insurance subsidiary to manage and mitigate its risk. This type of insurance allows businesses to have more control over their coverage, pricing, and claims process, which is often more flexible than traditional insurance markets. By establishing a captive, companies can tailor their insurance policies to meet their specific needs, potentially reduce costs, and retain more risk internally.

This concept stands apart from other forms of insurance, such as individual policies that people purchase or standard coverage models that focus on specific events like natural disasters. Furthermore, captive insurance is not limited to government entities; it is accessible to a wide range of businesses across various industries. This makes captive insurance an increasingly popular choice for organizations seeking to optimize their risk management strategies.