A group captive (or risk retention group) is basically the same concept, except that it is normally owned by a number of companies with the same risk or in the same industry.  Oftentimes, group captives are organized by a trade association or other umbrella groups for the industry.  Group captives allow their members to spread their risks, and to aggregate their buying power with reinsurers.   Assuming that the group is selective in what companies are invited to participate, the overall claims experience should make the captive more profitable than its commercial counterparts.  Such groups are particularly appropriate when their risks are misunderstood by the traditional insurance market and they otherwise would be charged higher premiums than what is justified by their actual risk.


The federal Liability risk Retention Act of 1986 offers qualifying group captives substantial freedom from state regulation other than the licensing jurisdiction.  For companies that must provide proof of insurance to their companies, and if perception or the captive’s lack of a rating may be an issue, a fronting arrangement can be negotiated with a licensed admitted carrier.  Qualification under the Act also relieves the group captive from complying with all but the anti-fraud provisions of federal and state securities laws.


Setting up a single parent or group captive (or risk retention group) is a long-term, complex undertaking that should not be lightly considered or undertaken.  It requires considerable effort in collecting premium and claims histories, and a feasibility study must be performed by an independent actuary in order to validate that the program makes sense in light of projected premiums, administrative and underwriting expenses, and likely claims and loss development.  Whether you go on-shore or off-shore, the licensing authorities will need to be convinced that the proposed captive makes economic sense and that the program is substantial enough to warrant their approval.