What is a captive insurer?

A captive insurer is specifically designed to insure the risks of a parent company or a group of companies. The primary function of a captive is to provide coverage for the specific risks faced by its owners, offering them more control over their insurance programs and potentially reducing costs compared to traditional insurance. This structure allows businesses to tailor their coverage to meet their unique needs and manage their risk exposure more effectively.

The other options do not accurately define a captive insurer. An insurer that operates in multiple states doesn't align with the captive model, which typically serves the specific interests of its parent company rather than a broad market. An independent broker represents various insurers and acts as an intermediary, which is different from the captive model that does not operate independently in that sense. Lastly, the term "insurance provider rated by independent agencies" refers to insurers being evaluated for financial stability and service quality, which does not define what a captive insurer is. Understanding this distinction helps clarify the unique role captive insurers play in the broader insurance landscape.