capital

In captive insurance, an all-purpose term having one of three different meanings: the amount initially needed to set up a captive, or the initial amount paid in; the total of this paid-in capital plus other forms of capital, like letters of credit; or the sum of these two plus accumulated surplus. The difference between capital in a captive and other forms of insurance capital is that it is usually considered risk capital by the owners, ready to be used up by adverse results of the business. This is why one seldom hears about "impairment of capital" in captive financial discussions. Instead, one hears about "reduction in capital."