Alternate risk transfer vehicles
Among the most common alternative risk transfer (ART) vehicles are:
Single-Parent Captive: An insurance or reinsurance company formed primarily to insure the
risks of its parent company or affiliates.
Group Captive: An insurance company, jointly owned by a number of companies, created to
provide a vehicle to meet a common insurance need.
Association Captive: An insurance company owned by a trade, industry or service group for the
benefit of its members.
Rent-a-Captive: A captive insurance company that creates legally segregated accounting silos or
“cells” within its facility and then rents those cells and the operational services of the captive to
other parties. The main purpose of a rent-a-captive is to provide the benefits of a captive structure
to parties that cannot otherwise afford the fixed cost of their own single-parent captive or are not
interested in the ownership and maintenance responsibilities.
Risk Retention Group: A liability insurance company that is owned by its members. Under the
Federal Liability Risk Retention Act (LRRA), RRGs must be domiciled in a U.S. state. Once licensed
by its state of domicile, an RRG can insure members in all states. Because the LRRA is a federal law,
it preempts state regulation, making it much easier for RRGs to operate nationally.
Risk Purchasing Group: A group of insurance buyers who band together, typically on a national
basis, to purchase their liability insurance coverage from an insurance company, including a company
operating on an admitted basis, a surplus lines basis, or a risk retention group. As the name implies,
the RPG serves as an insurance purchasing vehicle for its members.
Self-Insurance Trust: An arrangement whereby a participant contributes monies to a selfinsurance
reserve which is held by an independent entity that is specifically dedicated to the payment
of anticipated claims.
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