4CORNERSTONES OF CAPTIVE SUCCESS · CORNERSTONES OF CAPTIVE SUCCESS AN ALTERNATIVE RISK PROGRAM FOR...
21
Presented By | 4 CORNERSTONES OF CAPTIVE SUCCESS AN ALTERNATIVE RISK PROGRAM FOR THOSE WHO WANT CONTROL Danny Badovinac Captive Development Coordinator March 22, 2017
Transcript of 4CORNERSTONES OF CAPTIVE SUCCESS · CORNERSTONES OF CAPTIVE SUCCESS AN ALTERNATIVE RISK PROGRAM FOR...
Presented By |
4 CORNERSTONES OF CAPTIVE SUCCESS
AN ALTERNATIVE RISK PROGRAMFOR THOSE WHO WANT CONTROL
Danny BadovinacCaptive Development Coordinator
March 22, 2017
2
FOUR CORNERSTONES OF CAPTIVE SUCCESS
AN ALTERNATIVEGIVING YOU CONTROL
RETURN OF UNDERWRITING
PROFITS
DEDICATION TOSAFETY
CONTROL OVER YOUR CLAIMS
3
C&B CAPTIVE CREDENTIALS
• 7 Member-Owned Group Captives since 1993
• Currently over 220 members
• More than $175 million of premium
• Over $119,000,000 in dividends returned
• 99% Retention
• Administer the two largest transportation captives in the world
• Expert claims administration
• Proven safety services
• Network of resources
4
AN ALTERNATIVE RISK SOLUTION GIVING YOU CONTROL
RETURN OF UNDERWRITING
PROFITS
DEDICATION TOSAFETY
CONTROL OVER YOUR CLAIMS
AN ALTERNATIVEGIVING YOU CONTROL
THE STANDARD MARKET DILEMMA
6
THE STANDARD MARKET DILEMMA – BETTER OFF SELF-INSURING?
50% historical loss ratio = Insurance Company Profit
24%
194%
14%
29%
15%
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
4th Prior 3rd Prior 2nd Prior 1st Prior Current Year
Premiums vs. Losses
Premium
Losses
Loss Ratio
7
Best-in-class companies are leaving the standard market!
What does this mean for those who remain?
1. Pooled with the worse performing companies
2. At the mercy of market swings
3. Increased insurance costs
4. Loss of control
REMAINING INSURANCE POOL
THE STANDARD MARKET DILEMMA – ADVERSE SELECTION
BEST-IN-CLASS
8
10
9%
11
0%
11
9%
11
0%
11
3%
11
0%
10
8%
10
4%
11
0% 1
12
%
11
1%
12
2%
11
0%
10
2%
10
3%
10
5%
91
%
94
%
10
4%
99
%
10
2%
10
8%
10
4%
95
%
94
%
94
%
97
% 98
%
90%
95%
100%
105%
110%
115%
120%
125%
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
20
15E
201
6F
201
7F
Commercial Lines Combined Ratio
THE STANDARD MARKET DILEMMA – STABILITY?
9
WHAT LIES AHEAD? PROFITABILITY PEAKS & TROUGHS
-5%
0%
5%
10%
15%
20%
197
5
197
6
197
7
197
8
197
9
198
0
198
1
198
2
198
3
198
4
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
2016
*
Ret
urn
on
Eq
uit
y
P&C Return on Equity1977: 19.0%
1987: 17.3%
1997: 11.6%2006: 12.7%
1984: 1.8% 1992: 4.5% 2001: -1.2%1975: 2.4% 2011: 4.7%
10
WHAT LIES AHEAD? DECREASING INVESTMENT YIELDS
4.5%
4.2%
4.0%
3.8%3.7%
3.8%
3.6%
3.4%
3.6%
3.1%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016P
P&C Net Investment Yield
11
WHAT LIES AHEAD? COMBINED RATIO – AUTO LIABILITY
11
2.1
%
11
2.0
%
11
3.0
% 11
5.9
%
11
8.1
%
11
5.7
%
11
6.2
%
10
2.7
%
95
.2%
92
.9%
92
.1%
92
.4%
94
.1% 9
6.8
% 99
.1%
97
.8%
10
3.4
% 10
6.8
%
10
6.7
%
10
3.4
% 10
6.6
%
10
8.2
%
10
8.8
%
90%
95%
100%
105%
110%
115%
120%
125%
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
2015
E
20
16F
20
17F
Commercial Auto Combined Ratio
BEATING THE STANDARD MARKET
IN A GROUP CAPTIVE
13
HOW DO YOU BEAT THE WAVES OF THE STANDARD MARKET?
Buy Less Insurance
1. Self-Insure
2. Large Deductible
3. Single Parent Captive
4. GROUP CAPTIVES
14
BUYING LESS INSURANCE IN A GROUP CAPTIVE
Statutory Workers’
Compensation
General
Liability
Auto Liability &
Physical Damage
CAPTIVE RETENTION
$1,000,000
$300,000
$0
REI
NSU
RA
NC
ELO
SS
FUN
DS
15
THE PHILOSOPHY OF THE CAPTIVE RETENTION
RETAIN frequency type losses that are more predictable
Frequency type losses can be controlled though:
• Effective Safety Program
• Effective Claims Management
TRANSFER severity type losses that are less predictable
Severity type losses can be controlled though:
• Reinsurance Protection
• Group Risk Sharing
16
OPERATING COSTS
LOSS FUNDS
OPERATING COSTS
•Reinsurance
•Claims handling fees
•Broker commissions
•Other administrative expenses
LOSS FUNDS
•Pay for claims within the captive
retention
•Opportunity to profit
•Actuarially calculated based on
your historical losses
CAPTIVE RETENTION: ABILITY TO REDUCE INSURANCE COSTS
17
CAPTIVE RETENTION: ABILITY TO REDUCE INSURANCE COSTS
$26.8
$37.4
$50.2
$62.0
$73.8
$85.0
$94.7
$103.9
$116.8
$119,000,000
$0
$20
$40
$60
$80
$100
$120
$140
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Mill
ion
s
Cumulative Dividend History(Last 10 Years)
18
What does this mean for captive members?
1. Pooled with best-in-class companies
2. Group purchasing power
3. Pricing stability
4. Greater control
FAVORABLE SELECTION – GROUP PURCHASING POWER
BEST-IN-CLASS
REMAINING INSURANCE POOL
19
IS A CAPTIVE RIGHT FOR YOU?
• Is your company stuck in the Standard Market
Dilemma?
• Do you realize there is a better way of
purchasing insurance?
• Do you want to join a group of best-in-class
companies and take back control?
IF THE ANSWER IS YES, JOIN THE 220+
CAPTIVE MEMBERS WHO HAVE
ALREADY TAKEN CONTROL OF THEIR
INSURANCE DESTINY WITH
COTTINGHAM & BUTLER.0
25
50
75
100
125
150
175
200
225
2009 2010 2011 2012 2013 2014 2015 2016
C&B CAPTIVE MEMBERS
20
FOUR CORNERSTONES OF CAPTIVE SUCCESS
AN ALTERNATIVEGIVING YOU CONTROL
RETURN OF UNDERWRITING
PROFITS
DEDICATION TOSAFETY
CONTROL OVER YOUR CLAIMS
21
DANNY BADOVINACCaptive Development Coordinator
QUESTIONS?
2017 Captive Webinar Series: The Four Cornerstones of Captive Success
• May 10 – Take Control Over Your Claims
• July 12 – Group Captive 101
• September 13 – A Continuous Dedication to Safety
• November 8 – Reduce Your Insurance Spend
