The Captive Alternative · Defining The Captive Not licensed to sell to general. Special purpose...
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The Captive Alternative “Do Business Boldly”
Transcript of The Captive Alternative · Defining The Captive Not licensed to sell to general. Special purpose...
The
Captive
Alternative
“Do Business Boldly”
Defining The Captive
Not licensed to sell to general
Special purpose insurer
Purpose to support owners’ business
objectives
Finances risk of owners or participants
(i.e. sophisticated
Insureds)
Control
Stability
Opportunity
Control premium costs and improve risk management.
Find long-term financial stability.
Reap the benefits of premium return and increase safety in workplace.
Captive Benefits
Benefits of Captive Ownership
Captive Marketplace
6400+ captives worldwide
495+ new captive licenses issued in 2017
35+ states with captive legislation
Emerging markets in Latin America and Asia Pacific
Consolidation
*Stats per Captive Review World Domicile Update, May 2017
Common Risks Insured
Workers’ Compensation
General Liability
Auto Liability
Health Benefits
Professional Liability
Property
Cyber Liability
Warranty
Enterprise Risks
Other Insurable Risk
Types of Captives
Group Captive
Single Parent Captive
Types of Captives
Group Captive
Group Captive
Captive
A group of companies that come together to form their
own insurance company.
Lines of Coverage
Workers Compensation General Liability
Auto LiabilityAuto Physical Damage
Policyholder
Agent/Broker
Insurance Company
Your World Today
Shareholder/Policyholder
Policy Issuance
$
$$
Claims
Loss Control
Reinsurance
Your World Tomorrow
Opportunity Control$
Investment Income
Operational Improvement
Underwriting Profit Captive
Agent/Broker
Funding Structure
Retention
Premiums $200k to $2.0M
Desire Control
Financially Secure
Commitment to Safety
Entrepreneurial Spirit
Ideal Group Candidate
Single Parent Captive
Single Parent Captive
Insured/ Shareholder
Captive
A captive with a single shareholder.
Premiums >$2.0M
Desire Control
Financially Secure
Commitment to Safety
Entrepreneurial Spirit
Risk Distribution Requirement
Ideal Single Parent Candidate
ICS Statistics
ICS Construction Stats
7 construction group captives
230 member companies
35 states (headquarters)
Exposure in all 50 states
$437k average premium
Industries Represented
General Contracting
Street & Road
Heavy Construction
Masonry Mechanical/HVAC
Electrical
Excavation
Utilities
ICS Construction Performance
Rate Reduction
WorkersCompensation
19.8%
5.5%0.1%
General Liability
Auto Liability
*Companies in a captive 5+ years
$254M Distributions
30% Loss Ratio
ICS Construction Performance
24% Return on Premium
Risk Management
Risk Management
Establish captive guidelines and best practices
Semi-annual Risk Control Workshops
Quarterly Event Learning conference calls
Preferred vendor list
Claims management & loss control
Case Studies
Case Study: Group Captive
Electrical contractor firm with multiple locations throughout the U.S. that joined a homogeneous ICS group
captive in 2006.
Group Captive Member Success
Return on Premium
35%
$1.38 MMReturned to Date
WC Premium Rate Reduction
52%
32% GrowthIn Payroll From:
2006 - 2016
Adding to the Bottom Line
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
$1,400.0
$1,600.0
$1,800.0
$2,000.0
Prem
ium
(Tho
usan
ds)
Total Premium
Total Premium atInception LCF
Premium Savings in Last Policy Year
$1,050,258
Cumulative Premium Savings
$5,038,203
Distribution Bonus:$1,375,260
Experience Mod Since Joining Captive
Mod Reduction 38%
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
2008 2009 2010 2011 2012 2013 2014 2015 2016
Being Proactive
Risk Planning - Project Managers Analyze Jobs Potential Risk
Job Pre-Qualification Requirements
Extensive New and Ongoing Training
Staying Involved
Management Involvement in Captive and Claims Process
Active RTW program with Employee Follow-up
Safety Director Accompanies Employee to Doctor Visits
Case Study: Single Parent
Large general contractor with strong safety records formed a single parent captive in 2003 to buy-down large deductibles to
protect insured from the unpredictability of both the insurance industry cycles and their
loss exposures.
Risks Insured
Workers’ Compensation Deductible
General Liability Deductible
Auto Liability Deductible
Health Benefits Stop Loss
Builders Risk Reinsurance
Single Parent: Success Story
WorkersCompensation
40% 38%
73%
General Liability
Auto Liability
*2014 to 2019
38% Exposure Increase
79% Exposure Increase
79% Exposure Increase
Rate Reduction
Captive Trends
Employee Benefits
Correlation between WC and EB
Access to claims data
Focus on organizational health and wellness
Bonus: stable costs and talent management
Employee Benefits Group Captives
Why Join an EB Captive?
Win in Good Years
Stability in Bad Years
Control
Transparency
“Cleaner Pool”
50-500 Covered Employees
$500k+ in Fully Insured Premium
Entrepreneurial Spirit
Desire Control
Care About Employee’s Health
Understand “Risk for Reward”
Who is a Good EB Group Captive Fit?
Case Study 1: Employee Benefits
A Mechanical Company with 175 enrolled employees joined an employee benefits
group captive in 2015.
2015 2016 2017 TotalAverage Enrollment 174 176 176 526Fully Insured Premium $1,271,850 $1,510,179 $1,545,026 $4,327,055
Expected Captive Spend $1,233,088 $1,423,721 $1,322,839 $3,979,648
Actual Captive Spend $1,436,729 $1,180,390 $1,313,060 $3,930,179Captive Savings: Difference from Fully Insured
($164,879) $329,789 $231,966 $396,876
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,400,000
$1,500,000
$1,600,000
2015 2016 2017
Fully Insured Premium Captive Actual Spend
Expected Captive Spend
3-Year Captive Savings from Fully Insured:
$396,876
Member Case StudyFully Insured vs. Captive
Case Study 2: Employee Benefits
A rock and concrete company with 90 enrolled employees. They were self-funded for 20 years prior to joining the captive in
2013.
Member Case Study
$7,380
$12,289
$6,260 $6,575
$5,003
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
2013 2014 2015 2016 2017
Annual Cost Per Member
10% Decrease Per Year Claims Trend Since 2013
Claims Trend Since Joining EB Captive
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
WC RatesTrend Since Joining EB Captive 10% Reduction in WC
rates since joining EB Captive
Join
ed E
B Ca
ptiv
e
Step 1: Biometric Screenings• Employee & Spouse• Screening Options: Onsite, Lab or PCP
Step 2: At-Risk Must Take Action • 3+ Metabolic Risk Factors or Type II Diabetic• Must Complete One of the Following Programs:
• Naturally Slim or KrowdFitStep 3: Tobacco Cessation
• Tobacco Affidavit for Employee & Spouse• Tobacco Users to Complete Trestle Tree Cessation Coaching
Member Case Study
$2,400 per year for Not-At-Risk, Non-Tobacco or Complete Program(s)
Activity-Based Wellness
The following wellness requirementsare in place for this company’semployees enrolled on the health plan.
Incentive:
Doing Business Boldly
means betting on yourself.
“I can honestly say that after 12 years, it was one of the best business decisions we’ve ever made.” – Jeff Keller, Asphalt Paving Co.
Contact Information
Lindsay Chase, CPA, CPCUVice President FinanceInnovative Captive [email protected]
Jerry OuimetPresidentCobb Strecker Dunphy & [email protected]
Do Business Boldly.
