What aspect does a captive insurer maintain regarding profit?

A captive insurer is typically an insurance company that is wholly owned and controlled by its insureds, which are often businesses seeking to manage their own risk. The primary purpose of a captive is to provide insurance coverage to the parent organization and potentially other related entities.

In the context of profit, a captive insurer generates profits from the premiums collected, investment income, and effective risk management. Since a captive is established to benefit the parent company or affiliated entities, all profits that the captive earns ultimately belong to that parent company. This profit retention allows the parent company to reinvest the funds into its operations, improve its financial position, or cushion against future risks.

Other options can be clarified as follows: profit is typically not shared with the government, nor is it divided among policyholders like in mutual insurance companies, and it is generally not used primarily for external charity contributions, as the focus of a captive insurer is on managing the risk and financial performance related to the parent company's interests. Therefore, understanding the nature of a captive insurer's operations clarifies why the profits generated stay with the parent company.