What describes a captive insurance company?

A captive insurance company is specifically designed to serve the risk management needs of its parent company. It is typically owned and controlled by that parent firm, and its primary function is to insure the risks and losses that the parent company may face. This arrangement allows the parent firm to retain the risk and manage it more directly, often resulting in cost savings and more tailored coverage options that address the unique needs of the business. Captives can provide more flexible terms than traditional insurance markets and may also facilitate better loss control strategies.

The other options do not accurately characterize a captive insurance company. A captive is not publicly traded, does not necessarily operate independently across states, and is not limited to serving only government entities. It is specifically established to address the risks of a single entity or group of affiliated companies, which underscores its distinct nature in the insurance landscape.