How to Start a Captive Insurance Company
- Nate Jones, CPCU, ARM, CLCS, AU
- Nov 9
- 2 min read
Captive insurance companies have become a powerful tool for businesses looking to reduce insurance costs, gain more control over coverage, and improve cash flow. If you’ve ever wondered how to start a captive insurance company, this guide will walk you through the essentials—and explain how Wexford Insurance can serve as your trusted advisor throughout the process.
What Is a Captive Insurance Company?
A captive insurance company is an insurance entity created and owned by a business to insure its own risks. Instead of paying premiums to a traditional insurer, the business funds its own captive, allowing it to:
Control Coverage – Customize policies to fit unique risks.
Reduce Costs – Retain underwriting profits and investment income.
Improve Cash Flow – Keep premiums within the organization.
Gain Tax Advantages – Potential deductions and favorable structures.
Why Consider a Captive?
Captives are ideal for businesses that:
Spend $500,000 or more annually on insurance premiums.
Operate in industries with specialized or hard-to-insure risks.
Want greater transparency and control over claims and reserves.
Seek long-term cost stability and risk management benefits.
Steps to Start a Captive Insurance Company
Starting a captive involves careful planning and regulatory compliance. Here’s an overview:
1. Feasibility Study
Determine if a captive makes financial sense for your business. This includes analyzing:
Current insurance costs
Loss history
Projected savings and tax implications
2. Choose a Captive Structure
Common types include:
Single-Parent Captive – Owned by one company.
Group Captive – Shared by multiple businesses.
Rent-a-Captive – Lease access to an existing captive structure.
3. Select a Domicile
Captives must be licensed in a jurisdiction (domestic or offshore) that offers favorable regulations. Popular domiciles include:
Vermont
Delaware
4. Regulatory Approval
Submit an application to the chosen domicile’s insurance regulator, including:
Business plan
Financial projections
Governance structure
5. Capitalization
Fund the captive with required minimum capital, which varies by domicile and risk profile.
6. Ongoing Management
Captives require:
Compliance with regulatory filings
Actuarial reviews
Claims administration
Financial audits
How Wexford Insurance Can Help
Starting a captive is complex—but you don’t have to do it alone. Wexford Insurance acts as your advisor through every step:
Feasibility Analysis – Determine if a captive is right for you.
Formation Assistance – Help with domicile selection, licensing, and setup.
Risk Management Strategy – Design coverage tailored to your business.
Ongoing Support – Compliance, audits, and operational guidance.
Our team partners with leading captive managers and legal experts to ensure your captive is structured for success.
Conclusion
Captive insurance companies offer businesses a way to take control of their risk management and reduce long-term costs. With the right guidance, forming a captive can be a strategic move that strengthens your financial position. Wexford Insurance is here to help you navigate the process from start to finish.
