☰A captive is a licensed insurance company, typically owned by the business it insures. Premiums otherwise paid to an insurance carrier are paid to the captive instead. This allows the captive's owner to hold and invest risk capital, use it to pay claims as they arise, and keep the surplus as profit. On most commercial policies, 20 to 40 cents of every premium dollar covers the insurer's profit and expenses, and in a captive that margin stays in your business, building surplus the way retained earnings do.
The structure is neither new nor exotic. 90% of the Fortune 500 own at least one captive insurance company. Over 8,000 captives operate worldwide as of 2026, up from about 1,000 in 1980. Premiums flowing into captives have increased over 30% since 2021 alone. The reason for their growth is simple: they deliver significant value where the commercial insurance market can't. AM Best's captive composite has run a five-year combined ratio of 88.0 against 97.0 for comparable commercial insurers, meaning captives keep more of every premium dollar.