☰Self-insurance means absorbing losses directly on your balance sheet, informally or through a funded reserve. A captive formalizes that retention into a licensed insurance company, and the license is what changes the economics. A captive can underwrite risk and issue actual policies, hold regulated, actuarially set reserves, access reinsurance markets directly at what amounts to wholesale pricing, and insure risks beyond your own, such as coverage for customers or tenants. Self-insurance can do none of those things.
Self-insured reserves also compete with every other corporate priority; captive reserves are protected inside a regulated entity whose one job is standing behind your risk. For small, predictable exposures, simple self-insurance may be all you need. Once retention is large enough to deserve structure, pricing, and its own balance sheet, the captive is the professional version of the same instinct.