Yes this also counts for the AI. All the factions only have a few family members and thus only a few armies that they can move around. Defeating those armies means defeat for a faction.

But it has to be tested wether the AI actually builds up decent armies before attacking. There are reports in the original game of family members wandering around on their own. Hopefully CA will fix this in the patch and then this discovery might be a winner indeed.

Another bonus is that since captains cannot move cities will build up large garrisons which will make quite hard to conquer one. Of course this also needs to be tested...