engineering risk management alternatives may 10, 2007 with the insurance alliance
TRANSCRIPT
Engineering Risk Management Alternatives
May 10, 2007
With
The Insurance Alliance
Agenda
• Introductions• Keystone Risk Partners • Alternative Market Products• Opportunities
Who is Keystone?
• Mega broker expertise with boutique service Unique business model Unique people State of the ART corporate risk solutions
• Creative, Innovative, Results Oriented• Union of insurance solutions with
sophisticated corporate finance
The Keystone Business Model
Corporate Client
Association
Agency Captive
Group Captive Sponsor
Consultant
Broker
Broker
Broker
Broker
Rent-a-captive orCaptiveImplementation
Targeted Insurance andReinsurance Marketing andPlacement
Claims and Managed Care Analysis, Benchmarking and Vendor Selection
Analysis
Underwriting
Structuring
Pricing
Marketing
Implementation
Ongoing Review
BrokerMGA
Keystone Strategy Canvass
Client's willing to assume a portion of their on risk? Traditional PlacementKeystone Alternative
High ■ ■ ■ ▲ ▲ ▲ ▲
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Low ▲ ▲ ▲ ■ ■ ■ ■
PriceConcept of a
12 month policy term
TPA as focus for claims
administration
Risk transfer placement
Reliance on Letters of
Credit
Transaction based
marketing
Education on alternatives
Tax expertise / advice
Client ownership in plan design
Long term insurance planning & forecasting
Technology platform that
combines financial & claims data
Keystone Alternative
Risk Product
Long term effect on
ultimate net cost
What factors should be raised well above industry standards?
What factors should be created that the industry
never offered?
What factors does the industry take for granted that can be eliminated?
What factors should be reduced well below the industry standard?
Per
Occ
urr
ence
Los
ses
Frequency of Losses
Alternative Risk Financing ProgramsRisk Transfer
Retention
Via Captive
Loss Limit
Risk TransferFrequency Basis
Risk TransferSeverity Basis
InsuranceCompanyProvidesExcess
Alternative Market Offerings
Individual Insureds
Relationship of PartiesCorporate Insured
Insured
Carrier CaptiveVehicle
Premium Profits
Loss Fund
Relationship of PartiesCorporate Insured
Insured
Carrier CaptiveVehicle
Premium Profits
Loss Fund
Beneficiary
Corporate Insured- Ideal Candidate
• Privately Held Company• Minimum Loss Pick of $500,000• Financially Secure• Out of the Box Thinker• Estate Planning Motivations• Misunderstood Class of Business
Benefits to Insureds
“first dollar” cash flow stability“A” rated insurerUnbundled & customized service packageAccess to underwriting profit &
investment incomeAlternative to LOC’s for carrier securityEstate planning/deferred compensationTax deductibility for qualifying structures
Alternative Market Offerings
Direct Policies
Direct Policy
Insured
Captive Vehicle
Direct Policy- Ideal Candidate
• Privately Held Company• Uninsurable “Rainy Day” Exposure• Out of the Box Thinker• Financially Secure• Estate Planning Motivations
Alternative Market Offerings
Group Captives
Group Captives
A
Carrier
B C D
Captive Vehicle
A B C D
Group Captive- Ideal Candidate
• Homogenous or Heterogeneous• GC Premium between $200,000 and $1,000,000• Long Term Thinker• Financially Secure• Top Down Commitment to Safety
Alternative Market Offerings
Agency Captives
Relationship of PartiesAgency Captives
Agency/ThirdParty
Carrier CaptiveVehicle
Premium Profits
Loss Fund
A B C D
Tenants of a Successful Agency Captive
• Majority of accounts in captive should be existing customers
• Top down long term commitment• Captive not to be used as a new business tool• Distinct underwriting “hat” within agency• Additional spotlight on Claims and Loss Control• Risk threshold to be reviewed periodically
Captive “Perceived” Drawbacks
• Up front Capital• Collateral• Expensive• Difficult to enter and exit• Complexity of Program Structure• Time Requirements
When to Call?
• Gravitating to and from guaranteed cost• Company caught in reimbursement bind• Insured with wealth transfer objectives• Contractor looking for long term rate
stability • Horrific claims adjusting stories• No apparent capacity for coverage in market• Insured interested in writing 3rd party
business• Limited/restricted/expensive LOC capacity
Alternative Market Offerings
Opportunities