From: Captive.com/IRMI
Captive insurance has traditionally been used by large private corporations seeking greater control over risk financing and insurance costs. In recent years, however, captives have increasingly been explored and adopted by public entities that face many of the same challenges, along with others unique to the public sector.
For public entities, a captive insurance company can provide an alternative mechanism for accessing coverage, supporting stable cash flow, and managing risk retention and transfer over time. Captives can also help public entities contend with structural hurdles that may increase costs or complicate efforts to maintain a functional and comprehensive insurance program.
One commonly cited challenge in the traditional insurance market is insurer hesitation to underwrite public-entity risks. Market participants have noted that public-record requirements can raise concerns for insurers about the disclosure of pricing, underwriting approaches, and policy terms. These dynamics can contribute to narrower coverage offerings or higher costs in the commercial market.
Captives are often viewed as a way for public entities to address these constraints. They can provide greater control over coverage design, create a more deliberate approach to risk financing, and, in some cases, facilitate participation in reinsurance markets. Captives may also support access to certain coverages that can be difficult to obtain consistently in the traditional insurance marketplace.
