The Single-Parent Captive
A pure or single-parent captive belongs to one owner and insures the risks of that owner, its affiliates and, in some domiciles, controlled unaffiliated businesses such as key subcontractors under contract. The owner chooses the retention, the claims administrator, the reinsurers and the investment policy, and it keeps the underwriting result when losses come in below what was funded.
That control comes with the full cost. The owner capitalizes the company, pays the captive manager, auditor and actuary and carries every loss in the retained layer. Statutory minimums for a pure captive run from about $200,000 in Nevada to $250,000 in Arizona and Texas, and regulators and fronting carriers commonly require more for construction risks.
The full range of options is set out in our overview of captive structures for construction firms.
The Group or Association Captive
A group captive brings together several companies, often in the same industry, that agree to underwriting standards, safety expectations and a shared governance model. Each member typically funds its own losses up to a point and shares a pooled layer above it with the other members, with reinsurance above the pool.
For a contractor, the appeal is access: a firm with steady losses but not enough premium for a company of its own can still retain part of its risk and see its own results. The trade-off is shared exposure. If other members have a bad year, the pooled layer can cost more, and many programs can assess members or hold back returns.
Whether a group or a company of your own fits is what a captive feasibility review.
Cells, Rental Captives and Risk Retention Groups
Some domiciles allow a sponsor to run a captive with separate cells. In Nevada, sponsored captives fund participants through protected cells, and Arizona licenses protected cell captives whose cells keep assets and liabilities apart. A cell lets a company retain its own risk without forming a company, at a lower capital entry point, though the sponsor's rules and fees apply.
Risk retention groups are member-owned liability insurers formed under the federal Liability Risk Retention Act. They can serve members in many states once chartered in one, but they write liability only.
- Cell: segregated assets inside a sponsor's captive, sponsor sets the rules
- Rental captive: a company uses another owner's licensed captive for a fee
- Risk retention group: member-owned, liability only, chartered in one state
What Usually Decides the Choice
Premium size and loss predictability come first, because they determine whether a company of one's own can be priced and capitalized. Next come control and appetite for shared risk: owners who want to set every term tend toward a single-parent captive, while owners comfortable with common rules may prefer a group. Contract requirements and the lines to be written can override both, since state law limits which lines a captive may write directly and many owners require admitted paper through a fronting carrier.
- Premium spend and years of credible loss data
- Willingness to share losses and governance
- Capital and collateral the owners can commit
- Lines needed and each domicile's limits
- Exit terms and run-off of open claims
How a developer's portfolio might use either structure is part of our guide to developer and subdivider insurance programs.
Exit Terms and Run-Off
Leaving a captive is rarely a clean break. A single-parent owner may run off open claims inside its company for years or transfer them to another carrier. A group member typically remains responsible for its share of losses from the years it participated, and the program may hold collateral or returns until those claims close.
Reading the exit provisions before joining is one of the most useful steps in the whole decision, because they decide what a departure costs in a bad year.
Cell and sponsored structures in one domicile are explained under Nevada's captive types and capital rules.
Before You Ask for a Quote
What to Gather
- Annual premium by line and five or more years of losses
- The lines the contracts require from admitted carriers
- Capital and collateral the owners can commit
- Any existing affiliates or key subcontractors that might be insured
What to Ask the Insurer or Surety
- How is the shared layer priced, and can members be assessed?
- What control do members have over claims and retentions?
- What are the exit terms and run-off obligations?
- How does a cell sponsor charge fees and protect each cell's assets?
Quick Answer
A single-parent captive gives one owner full control and full cost; a group captive spreads cost and some losses among members under shared rules. Cells and rental captives sit between them. The choice usually turns on premium size, loss predictability and appetite for shared risk.
Common Mistake
Comparing entry price alone. The shared layer, assessment rights and exit terms decide what a group costs in a bad year, and the fixed operating cost decides what a single-parent captive costs in a quiet one.
Broker Perspective
We put the group program's rules and the single-parent model side by side on the same loss data, then look at what each would have cost in the firm's worst recent year.
Coverage Impact
Neither structure changes the coverage forms on its own; what is insured depends on the fronting policies, reinsurance and endorsements issued for the program.
Questions Buyers Ask
Can a group captive member be charged more after a bad year?
Often, yes. Many group programs can assess members or reduce returns when the pooled layer performs poorly. The program documents describe how and when.
Is a cell captive cheaper to start than a pure captive?
Usually the entry capital is lower because the sponsor's company is already licensed, but the sponsor charges fees and sets rules for each cell. The full cost depends on the sponsor and the program.
Can our key subcontractors be insured by our captive?
In some domiciles a pure captive may insure controlled unaffiliated businesses, such as businesses under contract with an affiliate. Whether that fits depends on the domicile's statute and the program's design.
Does a risk retention group cover workers' compensation?
No. Under the federal Liability Risk Retention Act, a risk retention group writes liability insurance only.
Official Sources
- Captive Insurance Companies, National Association of Insurance Commissioners. Defines a captive in its simplest form as a wholly owned subsidiary created to insure its parent and lists common types, including pure, group, association, rental, protected cell and risk retention groups. Verified 2026-10-25.
- 15 U.S.C. 3901-3902 (Liability Risk Retention Act), U.S. Government Publishing Office. A risk retention group is owned by members in similar businesses, assumes their liability exposure and is chartered in one state; other states may still require registration and taxes. Verified 2026-10-25.
- NRS chapter 694C (captive insurers), Nevada Legislature. Pure, association, agency, rental and sponsored captives; capital and surplus minimums; no direct personal auto; excess workers' compensation and reinsurance of certified self-insurers; tiered premium tax. Verified 2026-10-25.
- A.R.S. 20-1098 (captive insurer definitions), Arizona State Legislature. Defines pure, group, agency and protected cell captives; a pure captive insures only its affiliates and controlled unaffiliated business. Verified 2026-10-25.
- A.R.S. 20-1098.03 (capital and surplus), Arizona State Legislature. Minimums of $250,000 for pure and protected cell captives and $500,000 for group and agency captives, in cash or an irrevocable letter of credit. Verified 2026-10-25.
- Texas Insurance Code chapter 964 (captive insurance companies), Texas Legislature. A captive may insure only the operational risks of its affiliates and controlled unaffiliated businesses, may not write listed lines including workers' compensation, personal auto and residential property, and needs at least $250,000 of capital and surplus. Verified 2026-10-25.
Reviewed by the Principal, Gleason Insurance Brokers, LLCUpdated
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