Curious About Captives? You're Not Alone!

If your organization has been considering captive insurance lately, you’re part of a bigger trend. Even as parts of the insurance market begin to soften—with more competition and, in some lines, improved capacity—many organizations are still asking the same question: Is there a smarter way to finance risk? For many, the answer isn’t just about today’s premium level; it’s about building a more resilient, long-term approach to risk.

Curiosity about captives is common and the Captive Insurers and Risk Management team at Bennett Jones is here to help.

What Is a Captive Insurer?

At its simplest, a captive is an insurance company that a business (or a group of businesses) establishes to insure its own risks or the risks of related entities. Instead of paying premiums to a commercial insurer for every layer of coverage, a captive can retain a portion of risk in a regulated insurance vehicle—often paired with reinsurance to access broader markets.

Why Alberta?

Alberta has established a modern legislative and regulatory framework for captive insurance companies, overseen by Alberta's Superintendent of Insurance. For Canadian-headquartered groups (and international groups with Canadian operations), an Alberta captive can be an onshore option for building a more deliberate, data-driven approach to risk financing—while keeping governance, decision-making and economic activity closer to home.

How Can a Captive Benefit Corporations?

• Bring discipline and predictability to the cost of risk across cycles: Insurance pricing and terms can shift quickly. Captives can help organizations retain predictable layers of loss and buy third-party insurance (or reinsurance) where it’s most efficient—without rebuilding the program each renewal cycle.
• Fill coverage gaps and tailor terms: When off-the-shelf policies don’t fit (or don’t exist), a captive can provide bespoke coverage—subject to regulatory requirements and sound underwriting discipline.
• Keep underwriting profit (and investment income) in the corporate family: Where losses are better than expected, the economics that would otherwise accrue to a third-party insurer may remain within the captive—while still ensuring the captive is appropriately capitalized and managed.
• Improve claims outcomes and accountability: A captive can create tighter alignment between operations and risk management: clearer loss reporting, faster decisions and incentives to prevent repeat losses.
• Access reinsurance markets more directly: For certain programs, a captive structure can be a bridge to reinsurance capacity and expertise that may be difficult to access efficiently through standard placements alone.
• Turn risk data into strategy: Captives require organizations to quantify risk, set retentions, and formalize governance—often strengthening enterprise risk management and internal controls as a by-product.
• Support broader corporate objectives: Captives are often used alongside supply-chain, contract, ESG, cyber and operational resilience initiatives—helping align insurance spend with the realities of the business.

Are You a Good Candidate For a Captive?

Captives aren’t one-size-fits-all. They tend to work best where an organization has enough premium volume, appropriate loss history, and internal commitment to treat insurance like a strategic financial tool. Consider a discussion about captives if you:

• want to reduce reliance on the insurance cycle and make risk financing less reactive at renewal time;
• see an opportunity to pair captive retentions with attractively priced commercial insurance/reinsurance above the captive layer;
• have meaningful retained losses (or deductibles) already and want more structure, transparency, and internal accountability around them;
• face recurring exclusions or want more control over how certain risks are covered (for example, aspects of cyber, supply chain, or specialty liability exposures);
• want stronger alignment between risk prevention and insurance cost;
• have a multi-entity or multi-jurisdiction corporate structure that could benefit from centralized risk financing; and/or
• are prepared to invest in governance, reporting, and ongoing program management.

Alberta-Specific Considerations

Forming and operating a captive in Alberta involves (among other things) selecting the right captive type and program design, preparing a licensing application, meeting capital requirements and implementing robust governance and risk management practices and procedures. While the details will depend on your structure and objectives, successful captives typically focus upfront on:

• Program design: what risks go into the captive, what retentions make sense, and where commercial insurance/reinsurance sits above it.
• Governance: board oversight, underwriting discipline and clear decision rights (including around claims, investments, and use of surplus).
• Operations: selecting a captive manager and service providers (actuarial, audit, tax, legal, banking) and setting up reporting rhythms.
• Regulatory readiness: aligning the business plan, capitalization and risk management approach with Alberta’s expectations for licensing and ongoing compliance.

A captive can be a powerful tool—but it works best when it’s built around your business (not the other way around). The right next step is often a feasibility assessment that pressure-tests the economics, the risk profile, and the operational lift.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.