Insurance can be much harder to find today than even several decades ago. Increased costs and competition have forced many traditional insurers to focus on specific high-yield clients. The days of a movie star insuring her legs for $1 million dollars with a standard agency are mostly over. This void in the insurance market has been filled with specialty insurers and boutique agencies. The movie star may now insure her legs for an agency designed for movie production related risks. However, the price is likely much higher. For this reason, larger companies started captive insurance agencies. These agencies are wholly owned subsidiaries that exist solely to insure the parent company. However, the setup and maintenance costs of such a subsidiary are beyond the means of many small-to-medium sized companies. For these companies, insurance agencies offer rent a captive. In this way, any company can enjoy the benefits of captive insurance without having to deal with the startup costs.
Captive agencies may appear to be a form a self-insurance, but there is more to it than that. A company may insure themselves through the use of escrow-like financial instruments or keep a large backup fund (which often also serves as the pension fund), but publicly owned companies have a responsibility to their shareholders and the government ensures they meet that responsibility. Smaller companies can use rent a captive to meet their captive insurance needs at a much smaller cost.