What best describes a Single Parent Captive?

• A. Insurer owned by one company that insures all or part of the loss exposure for that company
• B. Insurer owned by multiple companies
• C. An insurance fund for a city
• D. A mutual insurer among employees

Answer: (A)

Captives are insurance companies created to insure the risks of a parent organization. A single parent captive is owned by one company and exists to insure all or part of that company’s loss exposure. The key idea is ownership by a single corporate parent, giving that company direct control over underwriting, risk retention, and claims handling for its own risks. This structure lets the parent tailor coverage to its specific risk profile, potentially improve cost efficiency, and retain underwriting profits within the corporate group. It’s different from a group or association captive, which is owned by multiple firms; from a municipal insurance fund that serves a city; or from a mutual insurer owned by policyholders rather than a corporate parent.