Captive assurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent circle or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers.
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By creating a "security blanket" for its insureds, an Georgia Insurance safeguard company may inadvertently find that its insureds may not be as risk-averse as they might otherwise be (since, by definition, the insured derelict transferred the risk to the insurer) |
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| This problem is known to the allowance management as moral hazard |
| To reduce their own financial exposure, guarantee companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in delivery that grossly magnifies their risk of cataclysm or liability. |