All entities called “captives” are not the same. In fact, some are not considered captives in the strict sense, including:
- Agency (or program business) captives: Sometimes called producer-owned reinsurance companies (PORC), these captives are frequently offered by insurance companies to keep their better agency clients or are formed by insurance agents and industry associations to align the financial interests of their groups with insurers. The owners and the insureds are not the same in fact the insureds may not even know that their risk is reinsured by a PORC.
- Special-purpose or transformer vehicles: These are offshore entities that transform insurance exposures such as catastrophes into marketable securities such as investment-grade bonds. These vehicles use the capital markets, not the insurance markets, to finance risk.