According to captive managers, tax experts and regulators, the prospective owner of a captive eligible for 831(b) treatment needs to meet these criteria:

• Must be profitable. Besides annual premiums and initial capital and surplus requirements of between $100,000 and $250,000, annual operational expenses range from $40,000 to $85,000, depending on the captive manager and type of captive structure chosen.  
• Typically generate between $20 million and $300 million in annual revenue. Those companies typically have enough risk to make a captive cost-effective but not so much risk that their premiums would exceed $1.2 million.
• Have identifiable risks to insure but cannot find either any commercial coverage or affordable insurance.
• Is psychologically capable of absorbing a loss at any time, including the day the captive opens.
• Has adequate risk distribution. The Internal Revenue Service states that if a captive covers a dozen insureds, such as its parent company's subsidiaries, and each insured accounts for 5-15 percent of the captive's premium volume, then the IRS automatically will determine risk distribution is adequate. The alternative risk-distribution safe harbor is if unrelated third-party business accounts for 50 percent or more of the captive's premium.
• Must choose a captive domicile carefully. Some regulators do not like certain risks or certain sizes of captives. Some regulators have greater experience than others in regulating smaller insurers. Others are highly attuned to a certain risk, because many businesses located within their domicile face the same risk.