A captive insurance company is a wholly owned insurance subsidiary of a non-insurance parent, which is used to self-insure the risks of the parent and associated companies. The parent company may be industrial, commercial or government organisations. The captive is formed to insure all or part of the risks of that organisation. This could also include customer related business such as warranty or marine cargo business.

Captive insurance companies can also be used by trade associations or companies with similar business risks, allowing them to join together in a cost-effective way to obtain insurance.

The captive insurance company concept has been of major benefit and a significant contributor to the profitability and balance sheet strength of thousands of large organisations throughout the world. The growth in the captive insurance industry reflects a change in the way that organisations finance risk. Captives reduce and control insurance costs by assuming and managing shareholders' risks.

In Maltese legislation the business of captive insurance is referred to as "Affiliated Insurance” and is defined as “the business of an insurance company which is registered in Malta and whose business of insurance is restricted to risks originating with shareholders or connected undertakings or entities." 

 
Why form a captive?