Life & Health Insurance Practice Exam 2025 – Your All-in-One Guide to Exam Success!

A captive insurer is primarily established to insure the loss exposures of its parent company or affiliated entities. This unique structure allows businesses to have more control over their insurance costs and risk management strategies, ultimately providing customized coverage that aligns with their specific risks. By creating a captive insurer, the parent firm can underwrite its own insurance, reducing dependence on the traditional insurance market and potentially leading to cost savings over time.

Other options do not accurately reflect the primary purpose of a captive insurer. While insuring the general public might be a function of traditional insurers, captive insurers focus specifically on the needs of their parent company. Protecting businesses against fraud and providing reinsurance to other companies are roles typically served by different types of insurance entities, not captive insurers directly. Ultimately, the main goal of a captive insurer is to provide coverage specifically tailored to the unique risks faced by its parent organization.