captive presentation revised 2 16-15 (3)
TRANSCRIPT
License # 0522677
Group Captive Insurance ProgramsGroup Captive Insurance Programs
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)
What a Group Captive is Not
Self Insured Group There is no “Joint and Several Liability”
exposure
A solution for companies with excessive claims
Benefits of Group Captives
Complete transparency• Know where every penny of every dollar
is spentThe ability to control costs of insurance
• Workers’ Comp, Liability & Auto Reduced Premiums over time
AND……
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
Conventional vs. Captive
PREMIUMS100%
Claims Fund61%
Conventional Captive
Captive Structure
Premium
Operating costs
Claims Fund (“A” Fund and “B” Fund)
Operating costs
Insurance policy, re-insurance, claims
management, loss control, captive
management
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
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
Claims & PremiumsTransparency ($300k premium example)
Operating Costs$117,000
Claims Fund $183,000
“A” Fund $135,000
“B” Fund $ 48,000
39% 61%
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: $117,000Premium Maximum Cost: $435,000
Total Equity in 5 years: $622,000
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!
FinancialsEquity 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
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
Captive Member Commitments
Premium: Paid quarterly
Risk Control Workshops: two annual workshops
Shareholder Meetings: two annual meetings
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
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
Service Providers