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Captive Types

Captive insurance company types need not be confusing.  Often people confuse type of insurance coverage targeted, such as a warranty captive, employee benefit captive or workers compensation captive, with a type. By "type" we mean legal structure and statutory licensing type, not the nature of the insurance coverages written.

They all are simply legal entities licensed to conduct insurance business.  Click here to view a simple diagram showing how a captive relates to you and your existing business operations.

Captive types are controlled by two factors. 

First, the statutory limitations of governing authorities, principally the domicile chosen for the captive insurance company.  Second, by the creativity of your team. 

Just like every new business venture, every captive is literally unique and should be. If someone is promoting a cookie cutter captive solution at low cost, it may very well be a tax shelter vehicle you should be concerned about verses a well designed captive that is a true risk management enterprise that may just happen to have congressionally intended material tax benefits.

New captive structures continue emerging and we at Captive Experts have and will continue helping leading firms in this industry and domiciles innovate in captive design and application areas..

In deciding the legal type of captive to form or participate with, make sure your business objectives are well defined. Start with undersatnding the principal purpose of the captive; Is it customer relations based, business venture/supply/distribution efficiency based, or employee relations and retention based? The business considerations, not just legal and tax factors, must drive the analysis and decision making process.

Here is a list of the more common types of captives, described in more detail on the legal variations page:

  • Single parent and other "pure" captives;
  • Group, Association, Industry or Agency captives;
  • Reinsurance Captives;
  • 831 B Captives (not really a type but rather a small captive qualifying for a special IRS tax incentive election);
  • Series and Cell Captives - for a good diagram of a series llc design diagram, click here.
Every other name you may hear describing a type or legal structure of captive will generally fall within one of the above three (3) categories including Risk Retention Groups (RRGs), Forced Party Captives, Rent-A-Captives, Segregated Cell Captive, Protected Cell Captives, Incorporated Cell Captive, Series LLC Captive, etc. Purchasing Groups are often compared to RRGs but are different.

Please review our legal variations page for definitions and types of risk exposure traditionally addressed by the various types of captive insurance companies

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