A captive can be one of the most powerful tools a business owner has for controlling insurance cost and building equity out of risk. It can also be an expensive mistake for a company that isn't ready. Before you model structures and domiciles, this checklist tells you whether the conversation is even worth having.
The signals a captive may fit
- You spend real money on premium. As a rough screen, meaningful commercial premium (often $500K+ across lines) is where a captive starts to pencil out.
- Your losses are better than your peers'. If you run cleaner than the class the market rates you against, you are subsidizing worse risks — a captive lets you keep that difference.
- You have stable cash flow. A captive is a real insurance company; it needs capital and the discipline to fund it in good years and bad.
- You think in years, not renewals. The payoff compounds over time. Owners chasing a one-year saving are usually disappointed.
The honest test: a captive rewards companies that already manage risk well and are willing to keep managing it. It is leverage on discipline you already have — not a substitute for discipline you don't.
What it actually asks of you
Owning a captive means capitalizing it, governing it, and treating it as a business — annual actuarial work, financial statements, and a board that actually meets. That overhead is why the premium threshold matters: below a certain size, the cost of running the captive outweighs what it saves.
If you check most of the boxes
The next step is a feasibility study — modeling your own loss data against single-parent, group, and cell structures to see what actually makes sense for your numbers. Our pillar guide walks through exactly that: captive insurance feasibility.
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