Which statement is true regarding rent-a-captive insurance models?

The correct answer highlights that rent-a-captive insurance models cater to small companies lacking resources for traditional captive setups. This model allows smaller businesses to participate in a captive insurance arrangement without having to establish their own dedicated captive entity. By utilizing a rent-a-captive, these companies can benefit from the advantages of a captive insurance structure—such as custom coverage and potentially lower costs—while avoiding the significant upfront investment and administrative burdens associated with setting up a standalone captive.

This option underscores the flexibility and accessibility of rent-a-captive insurance, making it a valuable alternative for small to mid-sized companies that may not have the capital or resources to create their own captives. The design of such arrangements allows them to share costs and risks with other participants, making it a practical solution for those who want to manage their risks effectively without a large capital outlay.

In contrast, options suggesting that rent-a-captive models require large initial investments or are exclusively for large corporations misrepresent the model’s intent and accessibility. Such misconceptions overlook the benefits that rent-a-captives offer to companies of varying sizes. The statement about providing unlimited insurance types does not accurately capture the structured nature of rents, which typically involve specific products or services that align with the collective needs of participants.