Mid-tier companies will soon have the option of retaining more risk through a unique form of rented captive insurance.

A new partnership between Aon, Zurich and United SPC is designed to allow smaller companies to enter the captive insurance market.

Captive insurance is a popular choice with large corporations, who have the capacity and balance sheet to retain risk on their books.

By dumping risk in a specially created insurance vehicle – often a postbox company located in a low-tax haven – companies essentially pay themselves premiums and use reinsurance to cover overheads.

Most middle-market companies previously did not have the capital to creative a captive and use insurance and their primary risk-shifting device.

But Aon Global Insurance Manager Steve Bankes says smaller companies could “rent a captive” under the new group captive solution without needing extensive capital.

He drew a parallel with real estate, describing rented captives as similar to rented apartments.

“They own the contents within the cell, but don’t own the walls,” he told insuranceNEWS.com.au “They pay a fee to rent capital from a third party.”

Rented captive insurance will be available from May 1.