What term is used for companies that set up their own insurance entity offshore to manage risks and optimize tax positions?

The term "Captive Insurance" refers to a specific type of insurance arrangement where a company establishes its own insurance subsidiary, often in a foreign jurisdiction, primarily to manage its own risks and to gain potential tax advantages. This structure allows the parent company to have control over its insurance coverage and can lead to cost savings and more tailored insurance solutions. By operating offshore, companies can also potentially benefit from favorable regulatory environments and reduced tax obligations, further enhancing their financial efficiency.

Captive insurance is particularly beneficial for businesses that face unique or high levels of risk, as it enables them to insure against these risks directly rather than purchasing standard insurance from third-party providers. The establishment of a captive allows greater flexibility in terms of coverage limits, policy terms, and overall risk management strategies.