Over the coming weeks, a series of posts will be shared to explore common myths and objections frequently raised by CFOs and Risk Managers across a wide range of industries. The intent is to support broader understanding and education around captive insurance by providing fact based insights that clarify misconceptions and highlight how captives can serve as a transparent and effective tool for risk transfer.

Our first post addresses one of the most common objections we hear when discussing captive insurance with mid-market companies

“Are we not too small for a captive.”

It’s a reasonable concern, after all, the word “captive” can still evoke images of large multinationals with sprawling risk portfolios and offshore subsidiaries. But in today’s risk and insurance landscape, that perception is increasingly out of date.

This post unpacks the size myth and explains why company size is no longer the deciding factor it once was in captive feasibility.

What Does “Too Small” Actually Mean?

From our experience when companies say they are too small, they usually mean one of the following:

1. They don’t have enough premium or risk to justify a captive.

2. They don’t have the internal resources to manage a captive.

3. They don’t have the cash flow to fund losses.

4. They don’t want to add regulatory or compliance complexity.

   
   

All fair points but each deserves a closer look.

Captives Have Become More Accessible Than Ever

Historically, captive insurance did require a certain level of scale. But advances in technology, changes in regulation, and the growth of supporting service providers have lowered the barriers dramatically. Today, companies with as little as $500,000 in annual insurance spend are finding a captive structure viable and extremely strategic, especially if:

• Commercial insurance premiums have risen out of step with claims experience

• Exclusions or narrow terms leave significant uncovered risk

• The company consistently self-insures deductibles or retains risk informally

• There’s a desire to stabilise costs and build a long-term risk financing strategy

It’s not about how big your company is. It’s about how predictable, retainable, and financially manageable your risk is.

Mid-Market Companies Are Leading a New Captive Wave

In the past 2 years, more & more mid-sized companies, especially in industries like healthcare, construction, manufacturing, and technology have been turning to captives as mainstream tools for managing risk. Why?

Because these businesses face:

• Tight insurance markets: Higher premiums, lower limits, and increased underwriting scrutiny

• More contractual risk: Customers, suppliers, and investors demand stronger risk transfer

• A need for control: Greater ownership over how claims are handled and reserves are used

Captives help solve these problems. And they do it in a way that aligns with the long-term interests of owners, boards, and finance teams.

Feasibility Comes First -  Not Commitment!

A properly structured captive should never be a leap of faith. That is why feasibility studies exist, to determine if your company’s size, risk profile, and financial position support a captive structure. This is a quantitative process that assesses:

• Retention scenarios

• Risk frequency and severity

• Industry benchmarking

• Domicile options and costs

• Capitalisation needs

• Regulatory and tax considerations

• Performance & ROI

If the economics don’t support it, the answer is clear. But you won’t know until you look.

Shared Captives and Alternative Models

Even if a single-parent captive isn’t the right fit today, there are other models designed specifically for smaller organisations

• Group captives — Pool risk with like-minded companies

• Cell captives — Rent a cell in an existing captive structure

• Protected cell companies (PCCs) — Share overhead but keep your risk and capital insulated

These options allow smaller companies to access the benefits of captive participation, underwriting profit, investment income, strategic control, without bearing the full administrative or capital burden of a standalone entity.

A Strategic, Not Emotional, Decision

Captives aren’t for everyone. But rejecting the idea based on size alone can mean missing a valuable opportunity. The question isn’t: Are we big enough?

The better question is:

Do you have enough risk and motivation to benefit from retaining and managing it differently? If the answer is yes, then you are not too small for a captive. You are just ready for a smarter conversation about risk.

About Capvartis

Capvartis, through its purpose-built platform CaptiveIQ, enables mid-market companies to evaluate, establish, and manage captive insurance programs by leveraging advanced data analytics, actuarial modelling, and machine learning. By combining technology with insurance expertise, CaptiveIQ delivers actionable insights that support informed, data-driven risk financing decisions. The goal is to make intelligent risk management strategies accessible beyond just the Fortune 500 — empowering businesses of all sizes to take greater control of their risk.