Captive Insurance
Captive insurance uses an insurer owned or controlled by its insured organization or group to finance and manage selected risks.
Captive insurance, risk pooling, and guaranteed investment contracts connect insurance structures with corporate risk financing and institutional investment.
Insurance can transfer loss to an unrelated insurer, retain it inside a corporate group, or spread it across a pool. The legal structure matters because two arrangements labeled “insurance” can produce very different economic, capital, liquidity, claims, and counterparty exposures.
This section covers insurance arrangements whose transfer, funding, or investment mechanics directly affect financial risk:
| Concept | Main question |
|---|---|
| Captive Insurance | Is risk transferred outside the group, retained through an owned insurer, or partly reinsured? |
| Risk Pooling | Do the number and diversity of exposures make aggregate losses more predictable and financeable? |
| Guaranteed Investment Contract | What does an institutional insurance or stable-value contract guarantee, and which issuer and liquidity risks remain? |
| Viatical Settlement | What value, coverage, privacy, premium, regulatory, and beneficiary tradeoffs arise when a life policy is sold? |
A company may use a captive to insure the first layer of property losses and buy reinsurance above that layer. The captive pools exposures across locations, charges premiums, holds reserves and capital, and pays covered claims. The corporate group still bears the captive layer economically, while reinsurers bear only the covered excess layer.
These pages provide general financial education. They do not determine insurance coverage, captive validity, actuarial reserves, tax treatment, regulatory compliance, or investment suitability.
Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.
Captive insurance uses an insurer owned or controlled by its insured organization or group to finance and manage selected risks.
A guaranteed investment contract is an institutional insurance contract that credits principal and interest under stated terms, commonly within stable-value arrangements.
Risk pooling combines multiple exposures so losses can be funded across the group and estimated with less relative volatility.
A viatical settlement transfers a life insurance policy to a third party for cash, usually for more than surrender value but less than the death benefit.