The he Ca Capti tive Alt ltern ernati tive “Do Business Boldly”
De Defin finin ing T The Captiv ptive Finances risk Purpose to of owners or support Special Not licensed participants owners’ purpose to sell to (i.e. business insurer general sophisticated objectives Insureds)
Captiv ptive B Benefits fits Control premium costs and improve risk Contr ontrol ol management. Stabi Sta bili lity ty Find long-term financial stability. Oppo Opportun unit ity Reap the benefits of premium return and increase safety in workplace.
Benefits fits o of f Captiv ptive O Ownership ip
Captiv ptive Ma Marketpl tplace 6400+ 6400+ captives worldwide 495+ 495+ new captive licenses issued in 2017 35+ 35+ states with captive legislation Emerging markets in Latin America and Asia Pacific Consolidation *Stats per Captive Review World Domicile Update, May 2017
Com ommon R on Risk sks s Insu Insured Workers’ Compensation Property General Liability Cyber Liability Auto Liability Warranty Health Benefits Enterprise Risks Professional Liability Other Insurable Risk
Types of C ypes of Captiv ptives es
Type pes o of C f Captiv ptives Group Captive Single Parent Captive
Group C Captive
A group of companies that Gr Grou oup Captiv ptive come together to form their own insurance company. Captive
Line nes of s of Coverage Workers Compensation General Liability Auto Liability Auto Physical Damage
You our W r Worl orld d Toda oday Policyholder Agent/Broker Insurance Company
You our W r Worl orld d Tom omorr orrow Shareholder/ $ $ Policyholder Agent/Broker $ Policy $ Issuance Cont ontrol ol Oppor pportunit unity Reinsurance Underwriting Profit Captive Claims Investment Income Operational Loss Control Improvement
Fun undin ing Str truc uctur ture Retention
Idea eal l Group up Can andidat ate Premiums $200k to $2.0M Desire Control Financially Secure Commitment to Safety Entrepreneurial Spirit
Singl gle P Parent Ca Captive
Single P le Paren ent Captiv ptive Insured/ Shareholder Captive A captive with a single shareholder.
Idea eal l Single P le Paren ent Can andidat ate Premiums >$2.0M Desire Control Financially Secure Commitment to Safety Entrepreneurial Spirit Risk Distribution Requirement
ICS CS Stati tistics cs
ICS ICS Const onstru ruction St on Stats 7 construction group captives 230 230 member companies 35 35 states (headquarters) Exposure in all 50 50 states $43 $437k 7k average premium
Indu Indust stri ries R s Represe sent nted Electrical General Contracting Mechanical/HVAC Masonry Street & Road Excavation Utilities Heavy Construction
ICS ICS Const onstru ruction P on Perf rform ormanc nce Ra Rate Reduc uction ion Workers General Auto Compensation Liability Liability 0.1% 5. 5.5% 5% 19.8% 19 8% *Companies in a captive 5+ years
ICS Const ICS onstru ruction P on Perf rform ormanc nce 30% 30% Loss Ratio $254M $254M Distributions 24 24% Return on Premium
Ris isk Ma k Management
Ris isk Ma k Management Semi-annual Risk Control Workshops Quarterly Event Learning conference calls Establish captive guidelines and best practices Preferred vendor list Claims management & loss control
Case se Stud Studies ies
Case Stud tudy: Group C up Captiv ptive Electrical contractor firm with multiple locations throughout the U.S. that joined a homogeneous ICS group captive in 2006.
Group C up Captiv ptive Me Member Suc uccess 52% 52% 35% 35% WC Premium Rate Return on Reduction Premium 32% 32% Growth th $1.38 $1 38 MM In Payroll From: Returned to Date 2006 - 2016
Addi dding ng t to o the Bot ottom om Lin ine $2,000.0 Premium Savings in Last Policy Year $1,800.0 $1,050,258 $1,600.0 Cumulative Premium $1,400.0 Savings Premium(Thousands) $5,038,203 $1,200.0 $1,000.0 Distribution Bonus: $1,375,260 $800.0 $600.0 Total Premium $400.0 Total Premium at $200.0 Inception LCF $0.0
Exp xperi rienc nce Mod Si od Sinc nce J Joi oini ning ng Ca Captive 1.3 .30 1.2 .20 1.10 10 1.0 .00 0.90 90 0.80 80 Mod R Mod Reduc uction ion 0.70 70 38% 38% 0.60 60 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bei eing Proactiv tive Job Pre-Qualification Requirements Extensive New and Ongoing Training Risk Planning - Project Managers Analyze Jobs Potential Risk
Sta tayin ing Involv lved ed Management Involvement in Captive and Claims Process Active RTW program with Employee Follow-up Safety Director Accompanies Employee to Doctor Visits
Ca Case se St Study dy: Si Sing ngle P Parent nt 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.
Risk sks Insu s Insured Workers’ Compensation Deductible General Liability Deductible Auto Liability Deductible Health Benefits Stop Loss Builders Risk Reinsurance
Si Sing ngle P Parent nt: Su Success St s Story ory Rate Reduction *2014 to 2019 Workers General Auto Compensation Liability Liability 38% 38% 40% 40% 73% 73 79% Exposure 38% Exposure 79% Exposure Increase Increase Increase
Ca Captive T Trends
Emplo loyee ee Ben enef efits Correlation between WC and EB Access to claims data Focus on organizational health and wellness Bonus: stable costs and talent management
Employee Benefits Group up Ca Captives
Wh Why Join in an E EB Captiv ptive? Win in Good Years Stability in Bad Years Control Transparency “Cleaner Pool”
Wh Who is is a Good EB Group C up Captiv ptive F Fit? it? 50-500 Covered Employees $500k+ in Fully Insured Premium Entrepreneurial Spirit Desire Control Care About Employee’s Health Understand “Risk for Reward”
Case e Study 1: Emplo loyee ee Ben enef efits A Mechanical Company with 175 enrolled employees joined an employee benefits group captive in 2015.
Membe ber r Ca Case se St Study dy Fully Insured vs. Captive 2015 201 201 2016 2017 201 Tota tal Average Enrollment 174 176 176 526 Fully 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 $3,930,179 Captive Savings: Difference from ($164,879) $329,789 $231,966 $396,876 Fully Insured $1,600,000 3-Year Captive Savings $1,500,000 from Fully Insured: $1,400,000 $396,876 $1,300,000 $1,200,000 $1,100,000 $1,000,000 2015 2016 2017 Fully Insured Premium Captive Actual Spend Expected Captive Spend
Case e Study 2: E Emplo loyee B ee Ben enef efits A rock and concrete company with 90 enrolled employees. They were self-funded for 20 years prior to joining the captive in 2013.
Membe ber r Ca Case se St Study dy Claims Trend Since Joining EB Captive Annual Cost Per Member $14,000 $12,289 10% Decrease Per Year 10% $12,000 Claims Trend Since 2013 $10,000 $8,000 $7,380 $6,575 $6,000 $6,260 $5,003 $4,000 $2,000 $0 201 013 201 014 201 015 201 016 201 017
WC R WC Rates Trend Since Joining EB Captive 10% 10% R Reduc uction tion in W in WC rates sinc ince joinin joining EB EB Captiv ptive 5% 0% Joined EB Captive -5% -10% -15% -20% -25% -30% -35% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Membe ber r Ca Case se St Study dy The following wellness requirements are in place for this company’s employees enrolled on the health plan. Activity-Based Wellness 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 • Mus ust C Compl mplet ete e One of the Following Programs: • Naturally Slim or KrowdFit Step 3: Tobacco Cessation • Tobacco Affidavit for Employee & Spouse • Tobacco Users to Complete Trestle Tree Cessation Coaching Incentive: $2,400 per year for Not-At-Risk, Non-Tobacco or Complete Program(s)
Doi oing ng Bu Busine ness Bol Boldly mea eans bet s betti ting o on yourself self. “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.
Cont ontact Inf Inform ormation on Lind Lindsay C Chase, , CPA, C , CPC PCU Vice President Finance Innovative Captive Strategies Lchase@yourcaptive.com 515.223.7038 Jerry Ouime Ouimet President Cobb Strecker Dunphy & Zimmermann Jouimet@csdz.com 612.349.2414
Do B Busine ness Bo Boldly ldly.
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