Captive insurance calculator: should we even look at one?
A quick first screen for a group captive, a cell, or a single-parent captive, not a savings promise. Enter your premium and five years of losses, and see a good year, an expected year, and a bad year side by side.
- Where one expected year of premium goes
- Break-even loss ratio against your own
- Good, expected, bad, and mixed years over your horizon
- Capital tied up, and plain-language fit flags
No email required to see your results. Illustrative only, and not tax, legal, or accounting advice.
Step one
Your program and your loss history
Pick a structure, then enter the premium you would move and your last five years of losses. It all runs in your browser, with no account. Nothing leaves your browser until you ask for a review further down.
Prefilled with illustrative numbers, not a benchmark and not your program. Change any of them.
Structure
Picking one loads typical costs for that structure (open the assumptions below to edit them). It usually starts to make sense around $150K of premium moved in.
Annual losses, last five years
Expected annual losses
$360,000
Average of the 5 years entered. Used as year 1.
How volatile are your losses?
Medium volatility: a good year runs at 0.65x expected losses and a bad year at 1.8x. Few small losses with the occasional large one is high.
Structure assumptions (editable)
One expected year
Where the premium goes
Your expected losses use 60% of premium. Break-even is 70%. In an average year there is room, and a bad year can still erase it.
Expected loss ratio
60%
$360K expected losses ÷ $600K premium
Break-even loss ratio
70%
$420K loss fund ÷ $600K premium
Surplus plus investment income
+$72,600
+$60,000 surplus, +$12,600 investment income
After annual fixed costs
+$72,600
This structure carries no annual fixed cost in your assumptions.
Money flow, one expected year
- Premium
- $600,000
- Frictional costs
- -$180,000
- Loss fund
- $420,000
- Expected losses
- -$360,000
- Surplus + investment income
- +$72,600
- Eventually returned to you
- $36,300
- Kept by the captive / pool
- $36,300
Illustrative estimate only, based solely on the numbers you entered. This is not a quote, rate indication, coverage recommendation, or offer of insurance. Actual premiums, deductibles, and settlements depend on underwriting and policy wording.
Over your horizon
5 years, four ways it could go
The good case and the bad case carry the same weight here. Surplus is shown as returned to you only up to your surplus-returned percentage, and real captives usually release it over several years, after claims develop. A negative difference means the captive scenario cost more than the traditional program.
| Scenario | Traditional premium | Captive premium + costs | Surplus returned | Additional contributions | Captive net cost | Difference |
|---|---|---|---|---|---|---|
Good years Every year runs at the good-year loss level | $3,315,379 | $3,325,379 | $548,695 | $0 | $2,776,684 | +$538,695 Captive scenario ahead |
Expected years Every year runs at your expected losses | $3,315,379 | $3,325,379 | $200,580 | $0 | $3,124,798 | +$190,580 Captive scenario ahead |
Bad years Every year runs at the bad-year loss level | $3,315,379 | $3,325,379 | $0 | $1,190,221 | $4,515,600 | -$1,200,221 Captive scenario behind |
Mixed Expected years, with one bad year in year 2 | $3,315,379 | $3,325,379 | $49,380 | $0 | $3,275,998 | +$39,380 Captive scenario ahead |
Captive premium + costs is premium plus $10,000 of formation plus $0 a year of fixed costs. Surplus returned is 50% of any surplus plus investment income, because the captive or pool keeps the rest (group captives pool and share some of it). Shortfalls are not reduced. Captive net cost subtracts surplus returned and adds any additional contributions. Difference is traditional premium minus captive net cost. Losses are pooled across years, so a good year can absorb a bad one before anything is returned or called.
Illustrative estimate only, based solely on the numbers you entered. This is not a quote, rate indication, coverage recommendation, or offer of insurance. Actual premiums, deductibles, and settlements depend on underwriting and policy wording.
Capital
Money that is not in your portfolio
Capital or collateral tied up
$150,000
25% of year-1 premium
That money is committed for your 5-year horizon, and it usually stays until open claims close, often 3 or more years after the last policy year. It may sit as cash, a letter of credit, or a capital contribution, and each has a cost.
Surplus is released the same slow way. Expect it over several years as claims develop, not at the end of each policy year.
Fit check
What we would look at first
No flags on these inputs
That is not a green light. It only means none of the four basic checks tripped. Real feasibility needs an actuarial study of your own losses.
Keep this
Take it to your next renewal conversation.
Print it, or copy the link, which reopens this page with everything filled in. Or send it to us and we will tell you plainly whether a captive is worth a deeper look.
Captive insurance calculator: worked example
Here is the calculator's default group captive scenario. It assumes $600,000 of annual premium, losses averaging $360,000, 30% going to fronting, administration, reinsurance, and fees, 50% of any surplus returned, and a 5-year horizon. This is an illustration, not a quote or a forecast.
| Scenario | Losses paid, 5 years | Loss fund surplus or (shortfall) | Captive vs traditional |
|---|---|---|---|
| Good years | $1,293,000 | $1,097,000 | +$539,000 |
| Expected years | $1,989,000 | $401,000 | +$191,000 |
| Bad years | $3,581,000 | ($1,190,000) | -$1,200,000 |
| Mixed (one bad year) | $2,292,000 | $99,000 | +$39,000 |
Rounded to the nearest $1,000. Positive means the captive scenario cost less than the traditional program over the horizon. Negative means it cost more.
How to read your results
Break-even against your own loss ratio. Break-even is the share of premium left to pay claims after fronting, administration, and fees. If your expected loss ratio sits well under it, there is room for a surplus. If it sits close to it or above it, a captive has little to work with, and a higher deductible is usually the better first move.
The bad year matters more than the good one. A good year caps out at the surplus you can keep. A bad year has no such cap. One severe year can wipe out several good ones, so read the bad row first and ask whether your balance sheet can absorb it.
Capital tied up. The capital or collateral is not in your portfolio for the length of the commitment, and it usually comes back only after open claims close, a few years past the last policy year. Compare that to what the same money would do elsewhere.
Surplus returned over years. Surplus rarely comes back in one check. It is usually paid as dividends or returned capital over several years while claims keep developing, and the captive may hold some of it against future losses. The calculator shows it as returned, so real cash timing will be slower.
Want the structures behind these numbers? Read real estate captive insurance for group, single-parent, and cell options with ballpark costs.
How this works
Your premium moves into the captive. A share goes to fronting, administration, reinsurance, and fees. The rest funds a loss pool. If claims come in under the pool, the surplus and its investment income stay with you. If they come in over it, you fund the gap.
Each scenario runs the same math every year, using your average loss as year 1 and your trend after that. Good and bad years scale those losses by the volatility you pick. The mixed row runs expected years with one bad year in year 2.
What it leaves out
- Tax effects of any kind. Talk to your tax advisor.
- Reinsurance attachment points and aggregate stop-loss detail.
- Dividend timing. Surplus is shown as returned, but it usually comes back over several years.
- Fronting carrier appetite and domicile rules, which change.
- Claims severity. Averages hide the single large loss that matters most.
- A real feasibility study, which needs an actuary and your actual loss runs.
Insurance and captive markets change every renewal. Talk to us about current trends and the risk retention strategies in use right now. We will tell you plainly if a captive is not the answer, and say what is.
Common questions
What does this calculator tell me?
Whether a captive is worth a closer look, nothing more. It compares what you pay today with what a captive could cost in a good, an expected, and a bad run of years, using the premium, loss history, and structure you enter. It does not predict your results, quote a price, or promise savings.
What is the break-even loss ratio?
It is the loss fund divided by premium. If 30% of your premium goes to fronting, administration, reinsurance, and fees, the other 70% funds claims, so break-even is 70%. Losses below that leave a surplus. Losses above it leave a shortfall you fund. Annual fixed costs, which are common in cell and single-parent captives, lower the true break-even, and the calculator shows both.
Why do bad years matter so much?
A captive keeps your good years and your bad ones. One severe year can wipe out several years of surplus, and it can arrive early. That is why the table gives the bad case the same space as the good one, and why a short horizon with volatile losses gets flagged.
How is surplus returned, and when?
Usually as dividends or a return of capital, and usually over several years, because claims keep developing after the policy year ends. The calculator shows surplus as returned to keep the comparison simple. In practice the cash arrives later, and some of it may stay in the captive against future losses.
What does a real feasibility study add?
An actuary reviews your actual loss runs, sets the expected losses and the confidence level, and sizes the capital. A fronting carrier and a domicile are chosen, reinsurance is priced, and the tax and legal work is done by the right professionals. This tool is the step before that, to help you decide whether the study is worth paying for.
Read more: Captive feasibility study: what it involves and what it costs
Want the plain-English version first?
Who a captive fits and who it does not, ballpark costs by structure, fit by property type, and a worked general liability example.
Captive insurance guideRetaining more on the property side?
A percentage wind deductible applies to each affected location's insured value, so one storm applies several. Size what you actually retain.
Wind & hail deductible calculatorCheck the limits before the structure.
A coinsurance clause cuts every claim, not just a total loss, when the limit trails replacement cost.
Coinsurance penalty calculatorSee where market pricing is heading.
The traditional premium you are comparing against moves every quarter. Our rate barometer tracks it, and the claims strategy guide covers how to protect the loss history a captive depends on.
Real estate risk managementFree renewal review
Talk to us about whether a captive is worth a look
The calculator is a first screen. It cannot see your loss runs, your lines, or what markets will accept today. Send your renewal date and we will tell you plainly whether a captive, a higher retention, or a better traditional program fits.
- A second set of expert eyes on your program, free.
- Marketed to the carriers that actually want your risk.
- No obligation, fully confidential.
Book 20 minutes or call (205) 999-4884