Captive Insurance for Public Entities and Public Entity Risk Pools (Part 1)

In early 2026, my colleague Rob Walling presented and published thought leadership highlighting how captive insurance companies enable the missions of the organizations they insure. Rob’s point of view was that captives supported and advanced the work of nonprofits, medical professional firms and other purpose-based organizations through sound financial and risk management.

Rob’s perspective underscored that captive insurance serves a similar role for public entities and public entity risk pools.

A public entity is a funded or managed governmental organization that serves the public interest. These may include counties, cities and towns, school systems, special districts, etc.

In the 1970s, strained coverage availability and a protracted period of high interest rates resulted in a liability insurance crisis for public entities. In response, public entities began forming collectives, or “risk pools,” to aggregate their individual risks to better access, afford and obtain needed insurance. It was an enduring and effective response to a substantial problem that had endangered the provision of public services.

Now, just as in the 1970s, public entity risk pools are looking for alternative solutions to realize affordable risk management. Captives offer a compelling value proposition for those public institutions with risk management programs that support and enable the critical services they provide their stakeholders.

Types of Coverages for Private and Public Entities

Public entities face a wide range of exposures. Some are shared with private companies in other sectors that, for decades, have been using captive insurance to manage risk. These include workers' compensation, general liability, commercial auto, property, and cyber—risks organizations face regardless of sector. There are other coverages that are related more closely to public entities, however, such as law enforcement and sexual assault and molestation (SAM) claims. Captives have proven valuable risk financing techniques for public entities across this entire spectrum of risk.

The strategic benefits that captive insurance offers private companies—flexibility, control and customization—are the same as those that accrue to public entities. The business purpose differs between those two types of organizations. Private companies pursue captives for:

• Cost reduction
• Rate stability
• Tax advantages
• Access to reinsurance markets

Risk pools often avail themselves of reinsurance and there are no tax benefits for public entity risk pools. Consequently, for public entity risk pools, the value of captives is to:

• Create value for members
• Build long-term rate stability
• Navigate difficult insurance markets
• Provide capacity when traditional insurance coverage is unavailable or unaffordable

A captive insurance company can help public entities obtain affordable coverage in a hard market and can provide extra capital in softer markets. It also provides protection around funds that could otherwise be appropriated to another department. It’s a set of compelling benefits for public entity risk pools.