Captive insurance is somewhat like a self-owned insurance company. It is established as part of a complex risk management strategy in the long-term hope of saving money. However, the company establishing a captive gains responsibility for accounting and reserves that it would not worry about if it had purchased insurance commercially. Captive schemes typically involve reinsurance. For example, the company may accept a million dollars in risk annually, but pay a reinsurer to cover losses beyond that point.
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