The advent of the “segregated cell/RRG” type of rent-a-captive and Risk Retention Group Insurance Company has created a myriad of new and interesting possibilities for captive or RRG owners.  Segregated cell rent-a-captives or RRG’s differ from conventional rent-a-captives in one important way – the firewalls separating each member’s assets are legally enforceable by law.  Conventional rent-a-captives segregate assets through contract alone. One of the more interesting segregated cell applications involves the conversion of single-parent equity (owned) captives or RRG’s into segregated cell or RRG companies.   The typical single-parent captive insures general liability, and perhaps automobile liability exposures.  One of the recognized criteria for taking such a deduction is the presence of third-party business, i.e., insurance premiums from parties unrelated to the captive’s shareholder(s).  Single-parent captives/RRG’s may insure third party risks; however, there is no structural way to avoid significant risk sharing between the shareholder’s and the third party’s risks.  In these instances, assuming third-party risk can be extremely dangerous, especially if the third parties escape rigorous underwriting evaluation. A segregated cell captive or RRG allows the facility to assume third-party business without having to share in the majority of the third-party’s risk.  The illustration below exemplifies a typical segregated cell captive or RRG.




Legal firewalls separate each cell or RRG/s assets from one another.  The captive/RRG risk resides in the general account, which also holds a small percentage of each cell/RRG/s risk, thus creating the necessary risk sharing for all parties.  This is only one innovative use of segregated cell/RRG captives, albeit one of the most effective.


F. Darrell Lindsey

State Approved Captive/RRG Manager

U.S. State Licensed Agent/Broker