☰Capital requirements vary by domicile, and the number is usually a function of the captive’s structure and the premium it writes. The regulator’s question is whether the captive holds enough cash to pay claims, so the more premium flowing into the captive, and presumably the larger the potential claims, the more capital you hold. The requirement is often set as a percentage of premium. For a single-parent captive, $250,000 is a common minimum, though in some cases it can be less. Joining a group or cell captive typically requires far less, because the existing entity has already met the capital obligations. Beyond the startup cash, regulators may also want collateral posted to the captive, which can take several forms, like letters of credit.
The capital itself is not spent. It funds an insurance company you own, sits on that company’s balance sheet, and proves the ability to pay claims even when losses run worse than projected. As the captive retains underwriting profit, surplus builds on top of that capital, and eventually capital can be returned to the parent if desired. The precise figure for your program is a feasibility-study output.