Captive presentation revised 2 16-15 (3)
- 1. License # 0522677 Group Captive Insurance ProgramsGroup Captive Insurance Programs
- 2. What is a Group Captive? A reinsurance company owned by its stockholders/policyholders Proven method for managing risk Insurance with a predefined best case and worst case (risk/reward)
- 3. What a Group Captive is Not Self Insured Group There is no “Joint and Several Liability” exposure A solution for companies with excessive claims
- 4. Benefits of Group Captives Complete transparency • Know where every penny of every dollar is spent The ability to control costs of insurance • Workers’ Comp, Liability & Auto Reduced Premiums over time AND……
- 5. The Greatest Benefit of a Group Captive The ability to turn the expense of insurance into an asset Dividends are paid with unused premium Can be returned to the company or stockholders
- 7. Captive Structure Premium Operating costs Claims Fund (“A” Fund and “B” Fund) Operating costs Insurance policy, re-insurance, claims management, loss control, captive management
- 8. Captive Structure, con’t. Claims Fund = “A” Fund and “B” Fund “A” Fund $0-$125,000 Frequency layer 75% of total Claims Fund “B” Fund $125,000-$350,000 Severity layer Risk sharing layer 25% of total Claims Fund
- 9. Best Case vs. Worst Case Best Case: No claims; pay Operating Costs only Worst Case: Pay Operating Costs + “A” Fund + “B” Fund + Additional “A” Fund
- 10. Claims & Premiums Transparency ($300k premium example) Operating Costs $117,000 Claims Fund $183,000 “A” Fund $135,000 “B” Fund $ 48,000 39% 61%
- 11. Example of Earning Equity (Claims Fund of $183,000) Paid claims •Year 1: $ 25,000 •Year 2: $1,000,000 •Year 3: $ 10,000 •Year 4: $ 25,000 •Year 5: $ 50,000 Equity •Equity Retained: $158,000 •Equity Retained: ($0) •Equity Retained: $173,000 •Equity Retained: $158,000 •Equity Retained: $133,000 For any one year: Premium Minimum Cost: $117,000 Premium Maximum Cost: $435,000 Total Equity in 5 years: $622,000
- 12. Year 2 Assessment Example “A” Fund assessment $135,000 (pd quarterly) 50% paid 1st year after assessment 30% paid 2nd year after assessment 20% paid 3rd year after assessment In the conventional market, your ex mod would rise 52 points for three years at a cost of $153,000 a year, or $495,000!
- 13. Financials Equity Summary Feb. 2014 44003 44005 44010 44012 44027 Capital 36,000 36,000 36,000 36,000 36,000 Cash Sec 0 39,558 0 220,288 137,062 Inv. Income 28,727 40,589 12,313 106,434 44,273 ________________________________________________________________________________ 64,727 116,147 48,313 362,722 217,335 Underwriting 2008/9 (32,488) (35,451) (29,290) (18,731) 0 2009/10 41,462 12,058 18,056 12,716 (7,330) 2010/11 38,403 67,857 12,293 (10,976) 3,404 2011/12 (4,442) 35,815 61,567 5,142 (23,293) 2012/13 86,648 54,442 113,732 18,807 103,908 2013/14 91,683 49,682 125,602 94,585 464,163
- 14. Financials, con’t. 44003 44005 44010 44012 44027 Total Equity 285,947 300,550 350,273 437,483 758,186 Less unpaid assmt. 9,612 (5,938) (7,922) (131,702) (119,082) Less closing costs 0 0 0 0 0 Letters of credit 290,628 55,448 170,162 0 595,189 Dividend payable 0 0 0 0 0 Due from shareholder 0 0 0 0 0 Net Equity 586,187 350,060 512,513 305,781 1,234,293
- 15. Captive Member Commitments Premium: Paid quarterly Risk Control Workshops: two annual workshops Shareholder Meetings: two annual meetings
- 16. Captive Membership Cost One-time Capitalization $35,900 Preferred Share, $100 Common Share Collateral (2x your “A” Fund) Cash Security, letter of credit, or combination * Capitalization, cash security, and premium earn interest income
- 17. What sets Owen-Dunn Apart? More than a decade of experience working with alternative risk programs Access to more than 30 alternative risk programs Have placed more than 100 clients into alternative risk programs Our agency’s single largest focus