Captive Insurance

Captive insurance companies allow large organizations to retain risk formally within a licensed insurance structure. Domiciled in favorable regulatory jurisdictions like Vermont, Hawaii, or offshore locations, captives issue policies to their parent companies and may reinsure portions of the risk with traditional carriers.

For COI compliance, captive insurer certificates present unique verification challenges. A vendor providing a COI from its own captive insurer may technically meet insurance requirements, but the coverage lacks the independent financial backing of a third-party carrier. Compliance teams should evaluate whether the contract permits captive insurance or requires independent carrier coverage.

When reviewing captive-backed certificates, assess the captive's financial strength ratings, regulatory standing in its domicile state, and whether reinsurance supports the program. Many sophisticated compliance programs specify minimum AM Best ratings that effectively exclude under-capitalized captives while permitting well-structured ones.