What Is Rent-A-Captive Insurance?

Rent A Captive insurance describes a situation or insurance model where a captive insurance company can be “rented” to provide the benefits enjoyed by standard captive setups without the management and overhead. Renting captives may be done for many reasons. Following are some of the primary benefits of this business insurance model.

Earned Investment Income

Companies that rent captives still receive all income from investments and underwriting profit—income that is typically retained by insurance companies directly.

Reduced Risk Management Costs

Companies that choose rent-a-captive can control the costs of their risk management programs. They can also reduce any after-tax cost of insurance or risk. Better management of insurance costs helps overall business finance processes.

Increased Coverage Flexibility

Companies with captive insurers can have greater flexibility in their insurance options, selecting only the coverage they really need or adding special endorsements they may wish to have.

Who Can Benefit From Renting A Captive?

The rent-a-captive model is well suited to larger companies that have a high level of financial independence but that are not quite able to form their own captive or that simply do not wish to take on the formative and operational costs and management of another entity. Organizations that operate in multiple states may also benefit from this program as they can select one common set of coverage options to meet varying state standards (as opposed to carrying multiple policies in different states).