What is captive insurance?

Captive insurance refers to a specialized form of insurance created to provide coverage for the risks faced by its parent company or affiliated entities. This model is designed to allow businesses to gain greater control over their insurance needs by creating their own insurance company, which insures their own risks rather than relying on traditional insurance markets.

This arrangement typically provides several benefits, including more tailored coverage options, potential cost savings, and the ability to retain profits that would otherwise go to an external insurer. Captive insurance can also help businesses manage their unique risks more effectively and can be particularly advantageous for organizations in industries with specialized or hard-to-insure risks.

Understanding this concept is crucial when learning about insurance options in Arizona, especially within the context of surplus lines, which often involve nontraditional insurance solutions for unique or complex risks that mainstream insurers may not be willing to cover.