Captive Insurance Feasibility Study: What to Expect
You have been paying rising commercial insurance premiums for years. Coverage is narrowing, claims handling feels impersonal, and you have started wondering whether there is a better way. Someone at a conference mentions captive insurance — your own insurance company, tailored to your risk profile, with underwriting profits staying inside your business. It sounds compelling. But before you commit to anything, one question needs an honest answer: is captive insurance actually viable for your organisation? That is precisely what a captive insurance feasibility study is designed to determine — and it does so before a single application is filed or a dollar of capital is committed.
What Is a Captive Insurance Feasibility Study?
A captive insurance feasibility study is a detailed financial, actuarial, and regulatory analysis that evaluates whether forming a captive insurance company makes sense for a specific organisation. It examines your historical loss data, current risk exposures, financial position, and operational readiness — and produces a clear recommendation on whether to proceed, and if so, how.
Most respected captive domiciles expect a feasibility study as part of the licence application process. In Bermuda, for example, the Bermuda Monetary Authority requires a comprehensive business plan including five-year pro forma financial projections before granting an insurance licence. The feasibility study is the foundation on which the business plan is built.
Critically, completing a feasibility study is not a commitment to form a captive. It is an informed decision-making tool — one that may conclude the timing is wrong, the premium volume is insufficient, or the risk profile doesn’t suit a captive structure. A thorough study that returns a “not yet” finding is just as valuable as one that gives you the green light.
The Three Core Questions Every Feasibility Study Must Answer
Most captive insurance feasibility studies are structured around three primary questions:
- Control — Will forming a captive give your organisation meaningfully better control over underwriting decisions, claims management, and risk retention than your current commercial insurance arrangements?
- Cost — Based on your actual loss history and risk profile, is captive insurance likely to produce financial savings over a five-year horizon, accounting for capitalisation, management fees, actuarial costs, and regulatory compliance?
- Capacity — Does your organisation have the capital and operational infrastructure to fund, govern, and sustain a captive insurance company over the long term?
If the honest answer to all three is yes, a captive is likely worth pursuing. If any of the three raises significant doubt, the study will surface that — and identify what would need to change for captive insurance to become viable in the future.
What the Study Process Involves
A well-structured captive insurance feasibility study typically moves through five stages:
- Data gathering
You will be asked to provide five years of loss history by line of business, current insurance premiums and policy structures, exposure values (payroll, revenue, property values, vehicle fleet), and information on any self-insured retentions or existing risk financing arrangements. The quality of this data directly determines the reliability of the study’s conclusions.
- Risk and coverage analysis
Actuaries review your loss history to identify patterns in frequency and severity, assess coverage gaps in your current programme, and project expected loss costs for the risks the captive would underwrite. This stage also evaluates whether uninsured or difficult-to-insure risks — cyber, supply chain disruption, reputational harm — could be brought into scope.
- Domicile and structure selection
The study analyses the most appropriate captive structure (single-parent, group, or segregated accounts company) and recommends a domicile based on regulatory environment, tax treatment, capitalisation requirements, and speed to licence. For many international businesses, Bermuda remains the preferred choice — combining EU Solvency II equivalence, a robust regulatory framework, and deep management expertise.
- Financial modelling
Actuaries produce five-year pro forma financial statements under both expected and adverse loss scenarios. According to Luzern Risk’s captive blueprint guide, this financial modelling covers income statements, balance sheets, and cash flow projections — incorporating assumptions on investment returns, loss payout patterns, expense growth, and capital accumulation. This stage also addresses reinsurance requirements, fronting arrangements, and collateral obligations.
- Recommendation and business plan
The study concludes with a formal recommendation — proceed, hold, or restructure — supported by the actuarial and financial evidence gathered. If the recommendation is to proceed, the feasibility study feeds directly into the captive business plan submitted to the regulator.
How Long Does It Take?
Timelines vary depending on the complexity of your risk profile and the completeness of your data, but most feasibility studies take between six and twelve weeks from initial data submission to final report. One widely cited case study showed a business completing its feasibility study in approximately three months, with the captive fully licensed and operational within six months of beginning the process.
The Bermuda licensing process, once a complete application is submitted, is generally considered one of the fastest among major global domiciles — a significant advantage for organisations with a clear business case ready to act.
Why the Captive Insurance Market Is Growing — and Why Timing Matters
The case for exploring captive insurance has rarely been stronger. The global captive insurance market was valued at $79.1 billion in 2024 and is projected to reach $120 billion by 2034, driven by rising commercial insurance costs, increasing risk complexity, and growing demand for alternative risk transfer solutions.
AM Best data reinforces the financial logic: over the five years to 2024, rated captive insurers preserved an estimated $6.6 billion for their owners — funds that would otherwise have flowed to the commercial market — while achieving a five-year average combined ratio of 88.0, compared to 97.0 for commercial casualty carriers.
For organisations facing hardened conditions in liability, property, or cyber lines, the feasibility study is the logical first step toward understanding whether captive insurance can deliver that same advantage for your business.
Conclusion: Captive Insurance Feasibility Study
A captive insurance feasibility study is not a formality — it is the critical first step in determining whether captive ownership is right for your organisation. By rigorously evaluating your risk profile, financial position, and operational readiness, a thorough study gives you the evidence to make a confident, well-informed decision. Whether the conclusion is to proceed, to revisit in twelve months, or to explore a different structure entirely, the study ensures that the decision is grounded in data rather than assumption.
Ready to Find Out Whether Captive Insurance Is Right for Your Business?
The feasibility study process works best when led by an experienced, independent partner — one with no incentive to push a predetermined outcome. IML’s captive insurance specialists in Bermuda have guided organisations through feasibility assessments for over 40 years, combining deep actuarial and regulatory knowledge with the kind of bespoke, independent advice that only a boutique firm can offer. Explore IML’s captive insurance management services, or contact the team to discuss whether a feasibility study is the right next step for your organisation.