#aciinsurance aci’s 3 rd advanced forum on captive insurance brian johnson managing principal...
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#ACIInsurance
ACI’s 3rd Advanced Forum on Captive Insurance
Brian Johnson
Managing Principal Bartlett Actuarial GroupPhone: (843) 377-0993brianj@bartlettactuarialgroup.com
State of the Captive Insurance MarketState of the Captive Insurance MarketFor Middle Market CompaniesFor Middle Market Companies
Tom Stewart
President
Innovative Captive Strategies
Phone: (515) 223-6852
tstewart@yourcaptive.com
Jeffrey K. Simpson
Director
Gordon, Fournaris & Mammarella, P.A.
Phone: (302) 652-2900
jsimpson@gfmlaw.com
April 23-24, 2015April 23-24, 2015
Tweeting about this conference?
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State of the Captive Market
The needs of the small/middle market, the latest in coverage, claims and
underwriting, and a look ahead at some of the novel risks that aren’t insured and
that can potentially be funded by a captive.
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State of the Captive Market
• Fairly Soft Market
• Some Market Swings for Certain Classes
• Lack of Availability of Self-Insurance Options
• Strong Performers not Rewarded
• Captive Interest is Strong 3
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State of MarketMiddle Market Captive ActivityGoals
Reduce Cost of Insurance
Cover Risks Not Typically Insured
Medical Stop-Loss
Unique Arrangements
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State of MarketMiddle Market Captive ActivityGoals Structure
Reduce Cost of Insurance Member-Owned GroupRisk Retention Group
Cover Risks Not Typically Covered Enterprise Risk Captive-Pure-Protected Cell-Series LLC
Medical Stop Loss Member Owned GroupSponsored Vehicle
Unique Arrangements Rental CaptiveAgency CaptiveAssociation Captive
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State of MarketMiddle Market Captive ActivityGoals Structure Risks
Reduce Cost of Insurance
Member-Owned GroupRisk Retention Group
AL, GL, WCProfessional Liability, Specialty liability
Cover Risks Not Typically Covered
Enterprise Risk Captive-Pure-Protected Cell-Series LLC
Deductible & ExclusionBusiness InterruptionLoss of Income
Medical Stop Loss Member Owned GroupSponsored Vehicle
Employer funding obligations to self-insured plan
Unique Arrangements Rental CaptiveAgency CaptiveAssociation Captive
Business or industry specialty exposures
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Number of Captives Worldwide
84% Single Parent
8% Group Captives
4% Risk Retention Group
3% Protected Cell
1% Other
Source: Captive Insurance Company directory, through calendar year 2013
May 2013 (Marsh Risk Management)
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Ideal Candidate• Entrepreneurial Spirit
• Desire to Take Control
• Commitment to Loss Control and Safety Improvement
• Financially Secure8
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Needs of the Market
• What problems have middle market captive owners historically been trying to solve?• Reduce Cost• Pricing Stability• Increased Control• Quality of Service• Fund uninsured exposures• Manage unique business on industry - related exposures
• What problems are emerging for the middle-market that a captive could solve? 9
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The Latest in Coverages, Claims and Underwriting
• Coverages• Traditional insurance coverages• Ability to increase retentions• Excess coverages• Difference in Conditions coverage
• Enterprise Risk Management Coverages• Low frequency / high severity• Generally unavailable in commercial market• Examples: Cyber Liability, Supply Chain Interruption
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The Latest in Coverages, Claims and Underwriting
• Claims• ERM claims occurring more frequently• Awareness• True emergence of unknown risks• The establishment of insurance companies specifically
designed to cover these risks is raising awareness of these risks
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The Latest in Coverages, Claims and Underwriting
• Underwriting• Models have been developed to quantify the risk• Every occurrence becomes a new data point• Data can be gathered from numerous sources, but
not yet one centralized repository
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• Influence of ERM on middle-market underwriting risk identification and coverage decisions
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Novel Risks That Aren’t Insured and that Can Potentially Be Funded by a
Captive• Cyber Liability• Supplier/Supply Chain Interruption• Reputational Risk• Contingent Business Interruption• Business Interruption from outside, uncontrollable sources
• Loss of Key Employees or Key Customers• Deductibles/Excess/Difference in Conditions
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•Cultural shift to cover these exposures and make claims. Business processes not currently built for it.
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