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Why do insurance companies use captives?

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Why do insurance companies use captives?

Enquiry is from progressive insurance locations near me subject matter

I had been asked this question in semester exam.

Other related questions to my question are:

What does a captive mean in insurance?

How do captives work?

Why is captive?

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The correct answer is: The Purpose of a Captive To be very clear, the purpose of an insurance company and, therefore, a captive is to pay losses (your own losses) and to afford you (the owner) more control over your risk and any losses that do occur. Put another way, captives are an alternative risk transfer mechanism used to finance risk.

The title of my answer is Captives 101: What Are They, and Why Do I Want One?

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