Building a Captive: From Application to Ongoing Strategy

At the 2026 Captive Insurance Companies Association (CICA) International Conference in Palm Desert, a session titled "Captive Applications and Business Plans: Best Practices" focused on one of the most foundational, yet often underestimated, aspects of captive formation and management: getting the application and business plan right from the start and maintaining them over time. 

Moderated by Kim Guerriero of Milliman, the panel brought together perspectives from a regulator, a captive owner, and a captive manager, offering a practical view of how captive applications are developed, reviewed, and refined in practice. Panelists included Vicki Fimea of the Arizona Department of Insurance and Financial Institutions, Theresa Severson of Kite Realty Group, and Andrew MacKay of Risk Management Advisors. 

The discussion centered on what makes a captive application successful, where common issues arise, and how business plans evolve as captives mature. 

The panel began by walking through how the application process typically unfolds. 

Captive Application Process 

• Review current insurance program  
• Conduct feasibility analysis  
• Decision to move forward  
• Develop captive business plan  
• Application, licensing, and capitalization  
• Commence operations  
• Ongoing review and re-evaluation  

This process begins with a review of the organization's current insurance program and exposures, followed by a feasibility analysis supported by actuarial work to evaluate expected losses and overall viability. If the organization decides to move forward, the process continues with development of the business plan, submission of the application, licensing and capitalization, and ultimately commencement of operations. Even at that stage, ongoing review and re-evaluation are expected as exposures and market conditions change. 

With that framework in place, the discussion turned to what regulators are actually looking for in an application. Ms. Fimea emphasized that clarity is critical, noting that the application should "tell a story" that can be understood by someone without prior knowledge of the program. The application should clearly explain how the captive will operate, what risks it will cover, and how it will be supported financially. Just as important is consistency across documents, as regulators review the business plan, feasibility study, financial projections, and supporting agreements together. If those materials do not align, it can create uncertainty and lead to follow-up questions. 

Building on that point, the panel addressed how applications are submitted in practice and where common issues arise. Mr. MacKay noted that applications should be submitted as a complete package, rather than in pieces. Submitting documents separately or revising them after submission can slow the review process and create confusion about which version is current. The use of templated materials was also identified as a frequent source of problems. While templates can be helpful, they must be carefully tailored to the specific captive. Outdated language or inconsistencies across documents often result in additional questions from regulators. Similarly, minimal responses within the application, such as referring to attachments without explanation, can make it more difficult for regulators to evaluate the submission. 

The discussion also highlighted that the business plan serves an important role beyond regulatory approval. Ms. Severson explained that these materials are often used to communicate the captive strategy internally, particularly to senior leadership. This requires translating the structure into a clear explanation of how the captive will function and why it is being formed. Securing this level of internal alignment is an important step, as forming a captive represents a long-term commitment. A business plan that is clear and well-supported is more likely to be understood and approved both internally and by regulators. 

From there, the panel focused on the financial components of the application, which are central to regulatory review. Ms. Fimea emphasized the importance of demonstrating that the captive is adequately capitalized and able to support the risks it intends to write. One key consideration is the financial strength of the parent organization, which provides context for the captive's ability to absorb losses. Actuarial analysis also plays a critical role. Regulators rely not only on the numerical results but also on the explanation of how those results were developed, including assumptions, data sources, and methodology. The focus is not on generating profits, but on ensuring that the captive remains solvent under expected and adverse conditions. 

Closely related to this is the captive's investment policy, which the panel described as an important part of governance. Mr. MacKay noted that overly restrictive policies can create challenges over time, particularly if they limit flexibility in how assets are allocated. Allowing for reasonable ranges can make it easier to manage investments as conditions change. Ms. Fimea added that the policy should function as a guide for directors and officers, clearly outlining expectations and referencing applicable regulatory requirements so that decision-making remains consistent over time. 

As the discussion shifted from formation to ongoing management, the panel emphasized that the business plan should not be treated as a static document. Mr. MacKay described it as a "live document" that should reflect how the captive is actually operating, rather than how it was initially designed. At a minimum, it should be reviewed annually and updated whenever there are changes to the program. Ms. Severson noted that this review often occurs alongside insurance renewals, allowing the captive to be evaluated in the context of current market conditions and organizational needs. 

In practice, changes to the business plan are a normal part of operating a captive. Ms. Fimea explained that material changes, such as adding new lines of business or modifying the structure, typically require regulatory approval. Communicating with regulators early in the process can help set expectations and reduce delays. The panel emphasized that these changes should be clearly explained, including the reason for the change and its expected impact, and supported by updated financial information where appropriate. 

Ms. Severson described how a corporate acquisition required combining two existing insurance programs, which in turn required updated data, new analysis, and adjustments to the captive structure. As part of that process, the organization revisited its reinsurance arrangements, moving from a single agreement covering multiple lines to separate agreements for property and liability. She noted that changes to the captive "don't happen in isolation," as adjustments to one part of the program often require reevaluating others. While separating the agreements provided greater flexibility in how each line was structured, it also required additional coordination and more detailed evaluation. 

The panel emphasized that a well-prepared, consistent application and an actively maintained business plan are central to how a captive is structured and managed over time.