Guide 1 · captive basics

Is a captive right for your business, yet?

A captive pays off when three things line up: enough premium to carry its running costs, losses steady enough to predict, and capital to stand behind it. Here are the published thresholds, and where each one comes from.

$250,000
Vermont’s minimum capital for a pure captive1
≈ $1.1M
average premium of newly formed captives Marsh manages3
$60–80K
yearly running cost, the Utah regulator’s estimate4
707
captives licensed in Vermont at the end of 20252

Three tests before a captive makes sense

1 of 3

Enough premium to carry the overhead

A captive costs money every year, whatever its losses: management, audit, actuarial work and regulatory fees. Utah’s insurance department estimates $60,000–$80,000 a year4. Given those costs, an often-used threshold premium for a single-parent captive is $750,000 to $1,000,000, though some form at lower levels5.

For scale: new captives managed by Marsh averaged about $1.1 million of premium, usually covering one or two lines3.

2 of 3

Losses steady enough to predict

A captive keeps the risk it insures, so it has to price that risk with some confidence. Actuaries give a captive a range of funding levels, called confidence levels; expected losses sit at about the 50th to 55th percentile6, and captives commonly fund above that, for example at 75%5.

A captive can cost more than insurance when its loss experience is worse than average5; the record matters.

3 of 3

Capital to stand behind it

Vermont requires at least $250,000 of capital and surplus for a pure captive, and the regulator can require more for the risk written1. One industry convention, described for property captives, puts capital at about one-third of premium7, and Vermont suggests premium of no more than four times surplus8.

The statutory minimum is a floor, not a target.

The costs people forget

Many captives need a licensed insurer to issue the policy and pass the risk back. That insurer charges for it and asks for security.

5–10%
of premium, a typical fronting fee9
125–150%
of the expected loss fund, typical collateral10
The honest answer is often “not yet”

If a captive doesn’t fit today, you should know what would change that.

Realtech’s captive design tool runs these tests on your own stores, payroll and claims, compares a captive with guaranteed cost, a retrospective plan and a large deductible, and tells you which fits now. We don’t sell insurance, so “not yet” is a perfectly good answer.

Sources

Figures are published estimates and benchmarks, not quotes. They vary by domicile, line of cover and year.

  1. Vermont Statutes, 8 V.S.A. § 6004, minimum capital and surplus by captive type. legislature.vermont.gov Statute.
  2. Vermont Department of Financial Regulation, 2025 Vermont Captive Insurance Aggregate Report (dfr.vermont.gov); Business Insurance, “Vermont adds 51 captive insurers in top 3 growth year” (businessinsurance.com): 707 licensed captives at the end of 2025. Regulator; trade press.
  3. Captive.com, “Marsh 2026 Benchmarking Report Highlights Continued Captive Growth” (1 June 2026), reporting Marsh Captive Solutions’ 2026 Benchmarking Report. captive.com Captive manager’s own book, as reported.
  4. Utah Insurance Department, “Captives in Utah: Basics.” insurance.utah.gov Regulator estimate.
  5. A. M. Conway (Tillinghast–Towers Perrin), “Ratemaking for Captives and Alternative Market Vehicles,” Casualty Actuarial Society Forum, Winter 2005. casact.org Actuarial literature, dated.
  6. D. Riggin, “Captive Underwriting Profits—without Third-Party Business,” IRMI. irmi.com Industry reference.
  7. D. Riggin, “Property Insurance Captives: A Funding Primer,” IRMI (2010). irmi.com Industry reference; property context.
  8. Captive.com, “Captive Insurance Metrics Must Evolve with Program Goals,” reporting a 2026 Vermont Captive Insurance Association conference session. captive.com Secondary.
  9. IRMI glossary, “fronting”: fees generally 5–10% of premium. irmi.com Industry reference.
  10. Captive.com (IRMI), “What Is a Fronting Arrangement and Why Do Captive Insurers Use Them?”: collateral often 125–150% of the projected loss fund. captive.com Industry reference.

This guide is general information about captive insurance. It is not insurance, legal or tax advice. Realtech is an independent consultancy and does not sell insurance.