• This issue arose most clearly in reinsurance, where the use of Financial Reinsurance to reengineer insurer tension sheets under US GAAP became fashionable during the 1980s

• The accounting profession raised serious concerns about the fitness of reinsurance in which cramped if any actual risk was transferred, and went on to address the issue in FAS 113, cited above
• While on its Hole In One Insurance face, FAS 113 is definite to accounting for reinsurance transactions, the guidance it contains is generally conceded to be equally applicable to US GAAP accounting for assurance transactions executed by mercantile enterprises.

In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100 percent subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures individual risks of the members of a professional, bartering or industrial association). Captives represent commercial, bread-and-butter and tax advantages to their sponsors because of the reductions in costs they corrective discover and for the ease of support risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither accessible nor offered in the traditional insurance outlet at reasonable prices.