The best way to define a captive insurance company is to compare what it does to what commercial insurers do.
Commercial insurers, which for the most part are publicly held companies, accept business on a wide basis from the general public, depending on what kind of insurance they underwrite…whether it is, for example, homeowner’s insurance, workers’ compensation insurance, automobile insurance, or medical malpractice insurance. These insurers generally accept applications through their agents and brokers from the general public.
A captive insurance company, on the other hand, with very few exceptions, does not accept business from the public in a general way. Also, for the most part, the insurance they do write doesn’t come to them through agents and brokers. Captives are organized to provide insurance coverage exclusively for one entity or exclusively for a group of insureds, where that entity or group has been defined and where the captive serves a very limited purpose with regard to those insureds.
Captives are granted licenses to do what they do. Generally speaking, they are licensed in one state…a state that has adopted a captive statute for the purpose of efficiently licensing limited purpose captive insurance companies. Connecticut has a captive law and is in the business, through the Connecticut Insurance Department, of regularly reviewing and licensing captive insurance companies.
CFSIC’s license to operate as a captive insurer has been granted by the Connecticut Insurance Department, and we are under that department’s regulatory authority.