Structure
Since the establishment of the first captive-type structure in the 1920s, the concept has evolved to meet the ever-changing demands of the corporate environment. The range of captive structures now includes: pure/wholly-owned captives, rent-a-captives, association captives and sponsored captives.Approximately 60%-70% of captives are wholly-owned captives. Also known as a single-parent captive or ‘pure’ captive, the wholly-owned captive insurance company acts as an insurer for its parent company or group. Its primary purpose is to underwrite all or a portion of the risks of its owner.
Instead of paying premiums to the traditional insurance market, the parent organisation effectively self-insures. It provides risk capital and premiums to its wholly-owned captive in return for the cover the captive provides. Should a claim arise, the captive will pay out to the parent company.
Wholly-owned captives provide insurance to just one parent company or group. In this structure, no third parties are insured and the captive does not write statutory classes of business to help the group meet its statutory requirements.