A captive insurance or reinsurance company is an insurance company owned by an industrial or commercial group, whose sole purpose is to insure certain risks of that group that are simply not available or too expensivve in the commercial insurance market.
It allows the group to reduce overall cost of insurance for the group and to organise a better risk management.
- Solution to market inadequacies
- Reduction or stabilisation of insurance premiums at group level
- Direct access to worldwide professional reinsurers
- Retention of the profits of good risk management (underwriting profits)
A captive also helps the group to reduce volatility of annual results:
- Optimization of financial flows linked to risk management
- Allocate free cash flow as a provision for future risks
- Mitigate the impact on annual results of some special risk areas