What do we call insurance companies that are created and owned by a parent company to insure its own risks?

Insurance companies that are created and owned by a parent company to insure its own risks are referred to as captives. These entities are specifically designed to provide coverage for the parent company, allowing it greater control over its insurance costs and the ability to tailor coverage to its specific needs. Captive insurance arrangements can also lead to potential tax advantages and serve as a risk management strategy for the parent organization.

Reinsurers, on the other hand, do not insure their own risks but instead provide insurance to other insurance companies, helping them manage their risk exposure. Mutuals operate on the principle of policyholders being owners, sharing profits and losses among them, rather than being directly associated with a single parent company. Stock companies are insurance organizations owned by shareholders whose primary focus is to generate profit for these shareholders; they do not exclusively insure the risks of a parent company. Therefore, captive insurance companies stand out as designed specifically for the purpose of managing the risks of their parent organization.