Captive / Self-Insurance Break-Even
As premiums rise, larger orgs ask whether retaining cyber risk beats buying it. This does the honest build-vs-buy arithmetic on your own numbers: commercial premium versus expected losses + captive/admin cost + the cost of the capital you reserve — with the bad-year exposure that keeps most firms buying at least an excess layer. Strategic and directional, not actuarial, tax or insurance advice.
Frequency × severity, from your own loss experience.
Setup amortised + running costs.
Opportunity cost of tying up that capital.
What you'd fund yourself if it hits.
Difference of $20,000/yr in favour of retaining.
With commercial cover, a bad year costs you roughly your premium + retention. Retaining means you fund the whole loss — this is the volatility you take on, and why an excess layer above a large retention is often the real answer.
What this calculator does
- As commercial cyber premiums rise, larger organisations ask whether retaining the risk — through a captive or formal self-insurance — beats buying cover. This calculator does the honest build-vs-buy arithmetic on your own numbers.
- It compares your commercial premium against the real annual cost of self-insuring: expected losses + captive/admin cost + the cost of the capital you have to reserve.
- It shows the break-even and the bad-year exposure, because retaining risk means keeping the volatility too — the reason most orgs still buy at least an excess layer.
- Strategic and directional, for larger orgs — not actuarial, tax or insurance advice. A captive is a regulated entity; involve your broker, actuary and tax counsel.
Why this matters
When commercial cyber premiums climb faster than an organisation’s actual loss experience, the question larger firms start asking is whether they are better off keeping the risk. Retaining it — through formal self-insurance or a captive — can lower expected cost and give control over terms, but it means holding capital against losses and absorbing a bad year without an insurer to smooth it. The decision is genuinely a trade-off, not a slogan, and it deserves real arithmetic.
This calculator frames that build-vs-buy decision on your own premium, loss experience and capital cost, and shows both the expected-cost winner and the bad-year exposure that usually keeps at least an excess layer in the picture. Strategic and directional — bring the result to your broker, actuary and tax counsel.
Frequently asked questions
What is a captive or self-insurance for cyber risk?
Instead of paying premium to a commercial insurer, an organisation can retain some or all of its cyber risk itself — informally as self-insurance (budgeting for losses and reserving capital) or formally through a captive, a licensed insurance subsidiary the parent owns. A captive can give more control over terms, access to reinsurance, and potential tax and cash-flow benefits, but it is a regulated entity with setup and running costs and it ties up capital. It tends to make sense only above a certain scale, which is exactly what a break-even analysis tests.
When does self-insuring beat buying cover?
Broadly, when your expected losses plus the cost of running a captive and reserving capital come in below what the commercial market charges for the same risk — and when your balance sheet can absorb a bad year without the smoothing a policy provides. If premiums are high relative to your actual loss experience, retaining can win on expected cost; if your loss experience is volatile or a single event could be catastrophic, buying (or at least buying an excess layer above a large retention) usually wins despite the premium. This calculator shows both the expected-cost comparison and the bad-year exposure so you can weigh them.
What costs does the calculator include?
On the commercial side, your annual premium. On the self-insurance side: your own expected annual losses, the setup and running cost of the captive or self-insurance program (amortised annually), and the opportunity cost of the capital you must reserve against losses (capital reserved times your cost of capital). It deliberately uses your own figures rather than industry assumptions, because a captive decision turns on your specific loss experience, capital position and the quotes in front of you. Tax effects, reinsurance pricing and regulatory capital rules are real and material but org-specific — the calculator flags them rather than guessing them.
Is this actuarial, tax or insurance advice?
No. A captive is a regulated insurance entity and the decision involves actuarial loss modelling, domicile regulation, tax treatment and reinsurance that are well beyond a browser calculator. This is an educational, directional model to frame the build-vs-buy question on your own numbers before you bring in a broker, actuary and tax counsel — who should make the actual call.
This tool is free and always will be. Would a Pro workspace — saved designs, team sharing and exports — be worth paying for?
Show me Pro →No account needed to use this tool — this just tells us whether Pro is worth building out.