A group captive is a legal entity jointly owned by a group of unrelated companies, and formed primarily to insure the risk of its member-owners. There generally are two types of group captives: Heterogeneous (dissimilar industries) and Homogeneous (similar industries). The objective of both types of group captives is to enable a grouping of mid-market employers to replicate the risk profile of a single large employer to spread risk, promote stability, and achieve leveraged cost savings from different service providers.
Within a group captive, each employer establishes a separate self-funded plan for their own employees, and then purchases medical stop-loss coverage according to their own risk appetite. The stop-loss is purchased from the common insurer or reinsurer that will provide coverage to each member of the captive.