How Captives Work
Captive Structures
The most common types of captives are 1) Single Parent, 2) Group, 3) Segregated Cell. Each of these has positives and negatives, but let’s look at what these types are.
A Single Parent Captive is the basic type as described by the general definition. It is an insurance company owned by the insured. While it is most common for the insured to own it, it does not necessarily need to be the insured (otherwise referred to as a “sponsored” captive), however there is only one owner.
A Group Captive is owned by multiple insureds or sponsors. Again, it is most common here for the insureds to be the owners. The group manages a single account that is used to collect premiums and pay claims to all the insureds in the group. While there are ways to mitigate it, the success of each insureds program is affected by all the others.
Segregated Cells are more commonly owned by a sponsor. In this model, each insured is provided with its own “cell.” Inside this cell the insured has their own bank account separate and distinct from any other insured, but is still owned and operated by the sponsor. Control of the accounts and funds rests with the sponsor.