Captives are becoming increasingly popular among China’s large state-owned enterprises as more large-sized enterprises, especially multinational enterprises, are taking this insurance approach as an important means of risk management, business magazine Caixin reported.

A captive refers to an insurance company that serves its parent company, the latter of which is not engaged in the insurance business. This model was first born in the mid-19th century, and is now becoming an important force in the international insurance market.

The US has the most captives in the world, with 90% of its 500 largest companies having their own captives. In Britain, 80% of its top 200 companies have set up captives.

Even though China had a late start in this industry, it is making rapid progress. In August 2008, China National Offshore Oil Corporation set up the country’s first captive. In less than three years since 2013, China Petrochemical Corporation, China National Petroleum Corporation, China General Nuclear Power Group, and China Railways Corporation have all set up their own captives successively.

Additionally, several Chinese companies have acquired or are on track to possess their own captives through overseas mergers and acquisitions.

Analysts said that setting up captives is an effective tool for enterprises to reduce reliance on commercial insurance companies and to improve the level of risk management.