Life & Health Insurance Practice Exam 2026 – Your All-in-One Guide to Exam Success!

A captive insurer is specifically established by a parent company to provide insurance coverage for its own risks and loss exposures. This arrangement allows the parent firm to manage its insurance needs directly, which can lead to cost savings and more tailored coverage options that may not be available through traditional insurance markets. Captives are particularly beneficial for businesses with unique exposures or risks that are difficult to place with standard insurers.

In contrast, the other types of insurers mentioned play different roles in the insurance market. Surplus lines insurers are used for risks that are not typically covered by standard insurance policies, reciprocal insurers are formed through mutual agreements among policyholders to provide insurance to each other, and primary insurers are the initial providers of coverage in a given insurance arrangement. Understanding the specific purpose and functionality of a captive insurer helps clarify its distinct role within the insurance framework.