Beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

General Insurance Manual

Captive insurers: background

The phrase ‘captive insurer’ refers to a (usually) wholly owned insurance subsidiary within a group of companies, which in many cases is not itself an insurance group. The captive’s business will consist wholly or mainly of insuring and reinsuring the risks of its fellow group members.

Captives may be self-managed (by the insured group) or managed through third party captive managers, as the majority are. These managers are often divisions of large brokers.

Types of captive insurer

Pure, or direct captive: a single parent captive writing only the risks of its owner or its affiliates.

Insurer captive: where the group is itself an insurance group.

Reinsurance captive: the premiums go to a fronting insurance company, which passes on the bulk of the premium and risk to a captive. See GIM11030.

Multi-owner captive: captive owned by two or more unrelated persons or groups and writing their risks.

Diversified captive: one that accepts risks in addition to those placed by its owner and affiliates.

Health care captive: one owned by a health care undertaking.

Rent-a-captive: one operated by persons unrelated to those placing insurance in return for a fee. Often undertaken through protected cell arrangements - see GIM11020.

Captives may also be formed by brokers to handle particular classes of risk, or by industry or trade associations. They may form part of alternative risk transfer arrangements - finite reinsurance. See GIM8000+.


The groups of ship owners who met in London coffee houses to share risks and eventually gave rise to the Lloyd’s insurance market (see LLM1010) display some similarities to captives, as well as to mutuals (GIM9000+).

The earliest true captives in the UK were established in the 1920s and 1930s on a co-insurance basis, mainly for property risks. An example was ‘Blackfriars’ set up by Unilever and ICI. The concept took off in the 1950s, notably in the US, with a view to avoiding complex State based insurance regulation. Worldwide estimates of captives vary from 5000 to 10000, of which the UK share is perhaps 10 or 15 per cent. Most of the top 100 UK companies employ captives in some form, and they are not by any means entirely tax driven, though tax considerations will usually feature. See GIM11040.