Securing Business Through Captive Insurance Companies

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Securing Business Through Captive Insurance
Companies

• Presented
• March 19, 2003

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Indeed Interesting Times for Our Industry

• DOL - Is it for real
• AHP legislation - fact or fiction
• Convergence of corporate Americas H.R. and Risk
  Management Departments - Now wouldnt that be
  something!!

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New Business Opportunities For

• TPAs
• MGUs
• Excess Insurers

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Dicks Rules of Order

• Order is overrated as a learning experience
• Stand up and proclaim
• Questions
• Clarifications
• Disagreements

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Captives 101

• Control coverage design and management
• Share in underwriting and investment income
• Big payday when you sell or take on partners

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Your Name Here

• Note The point isnt that people forming
  captives are going to be taking all the profits
  from traditional insurance companies just a
  good share!

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What is a captive

• Captives are truly "Special Purpose Insurance
  Companies." They are created primarily to serve
  a single corporation (or corporate family),
  members of an association or the clients of a
  TPA, MGU and/or Excess Insurer. The captive's
  owner(s) control and direct its operations.

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Captive Domiciles

• Seventeen states, the District of Columbia and
  the U.S. Virgin Islands have enacted laws that
  regulate these Special Purpose Insurance
  Companies differently than traditional commercial
  insurers.

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What is a protected cell

• The term "protected cell" applies to separate
  insureds' risks that are segregated (protected)
  from other insureds' risk exposures and
  liabilities.
• Protected cell design structures are flexible in
  make-up.

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Traditional Captive
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Sponsored Captive
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CAT Cover
Aggregate Loss Cover
Specific Loss Cover
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Virtual Captive
Insured
Reinsurer 1
Insurance Company
Policy
Policy
Losses
Experience Account
LOC
Reinsurer 2
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Virtual Captive

• Insurance Company issues Policy subject to a
  deductible or SIR.
• Reinsurer 1 issues Indemnification Policy to
  Insured.
• Reinsurer 1 reinsures to Reinsurer 2.
• Reinsurer 2 posts LOC to Insurance Company to
  fulfill collateral obligations.
• Insured indemnified for losses in deductible/SIR
  layer.
• Upon commutation, experience account is returned
  to Insured.
• Upon novation, experience account is novated to
  newly formed Captive.

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TPA Captive Strategy

• Client marketing and retention
• Control coverage design and management
• Money

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MGU Captive Strategy

• Attract new TPA/Insured business
• Allow TPAs/Insureds to participate in
  risk/rewards
• Underwriting partnership opportunities with
  markets

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Excess Insurer Captive Strategy

• Write and retain good business
• Glue for long term partnerships with TPAs, MGUs
  and Insureds
• Creative funding alternatives for CAT losses and
  long tail claims

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Captive Formation Steps

• Identify the Three Thes
• Why
• How
• Return
• Identify the Team
• Leader
• Actuary
• Lawyer
• Accountant
• Note Actuaries, attorneys and accountants are
  also integral to formation

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Hire Me!

• Richard C. Goff
• RCGoff_at_mimsintl.com
• 800-899-1399
• www.mimsintl.com
• www.taftcos.com
• (captive management services)

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