PUBLISHED ON: January 1, 1998
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An American business
that self-insures by
forming a captive
insurance company is in for
a culture shock like Dorothy
experienced in Oz, but without
a happy ending. The tornado
will hit when claims-paying time comes.
There is a big difference between being a policyholder
dealing with insurance companies and
owning or renting a captive. Putting a captive
between the policyholder and real insurance
transforms the policyholder into an insurance
company. The treatment the former policyholder—now
insurance company—receives from
insurance companies and reinsurance companies
is entirely different.