Speakers. INS207: Designing Insurance for the C-Suite. Overview of C-Suite Issues. Our Approach to the Topic

Transcription

1 Welcome to RIMS 2012 Annual Conference & Exhibition INS207: Speakers Catherine Kroll Vice President, Risk Management DDR Corp. Craig Goesel Senior Managing Director Mesirow Financial Michael Amoia, JD, LLM (Tax), CFP,CLU, ChFC Vice President, Advanced Sales Crump Life Insurance Services and Potomac Affluent Markets 2 Overview of C-Suite Issues Our Approach to the Topic Craig Goesel Issues arising from management company operations: D&O Fiduciary Social Media - business Personal Issues Life Insurance Retirement Benefits Estate Planning Kids/College Social Media - personal Non-corporate board involvement Issues arising from employment Non Qualified Deferred Compensation Planning Health/Excess Disability Insurance Kidnap& Ransom Travel Accident Foreign Travel Issues Impact to business entity because of the loss of a key employee due to disability or death Use The Application Process To Your Advantage! Catherine Kroll Vice President, Risk Management DDR Corp. Use The Application Process To Your Advantage! Access to the C-Suite Insight into organizational changes Better prepared for underwriter meeting Determine who has outside board positions and review the D&O coverage 1

2 The Limits Conundrum The Limits Conundrum Craig Goesel Senior Managing Director Mesirow Financial Purchase not enough; uncovered claim Risk Manager at fault Purchase too much; unneeded expense Risk Manager at fault Do nothing Risk Manager fired Peer Purchasing Data Severity Distribution Securities Class Action Cases Settlements from 2005 to 2012 All Company Sizes Publicly traded; Market Cap $1B < $4B Privately held; Revenues $50M to $200M Cumulative Severity Distribution of Securities Class Action Cases Settlements from 2005 to 2012 All Company Sizes Severity Distribution Securities Class Action Cases Settlements from 2005 to 2012 $1B to $5B Market Caps (Market Caps used from beginning of Class Period) 2

3 Cumulative Severity Distribution of Securities Class Action Cases Settlements from 2005 to $1B to $5B Market Caps (Market Caps used from beginning of Class Period) Top 10 D&O Settlements: Securities Class Action Settlements Plus Related Case Settlements 2005 to 2012 ($1B to $5B Market Caps, Market Caps used from beginning of Class Period) *does not include defense costs Rewarding and Retaining Executive Talent Michael F. Amoia, JD, LLM (Tax), CFP, CLU, ChFC Vice President, Advanced Sales Crump Life Insurance Services Income Replacement 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Disability Benefits Shortfall Covering Income Gaps $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 Group Coverage is limited Definition of disability difficult to meet Non-Portability Could change frequently because of vendor changes Excess Disability Income The Exceptional Income Protector Up to $1,000,000 + per month of benefit Lump-Sum benefits available Multiple Elimination Period options 1-5 year Benefit Periods Own Occupation definition Residual Benefits and COLA available Annual Incom e 3

4 A CEO earning $1 million with $30,000 per month of existing personal disability in force LTD of 60% to $20,000 Non-Can DI of $10,000 = Traditional Cap of $30k replacing only 36% Case Study: They underwrote and issued an additional $20,000 per month to bring his replacement ratio from 36% to 60% of gross income Supplemental Life Insurance Group Coverage Limited Non-Portable Could change frequently because of vendor changes Difficult to integrate into personal estate plans COLI (Corporate Owned Life Insurance) Certain programs allow Guarantee/Simplified Issue Endorse excess death benefit to employee economic benefit taxable income, but may be less than individual coverage costs Corporation received a deduction since employee recognizes income Company may keep contract or distribute to employee Can be used as a funding option for Deferred Compensation Compensation: Recent Trends Chief Executive Group Research surveyed 789 CEOs of privately-held companies in 2011 on the compensation levels and practices in their companies.* The found that the best performing companies have: Equity and phantom equity tools to encourage CEOs and other senior executives to build long-term value Formal equity program with the least annual re-pricing of the value of stock and option holding Vesting based on performance rather than time *Chief Executive Group, LLC One Sound Shore Drive, Ste 100, Greenwich, CT Survey The Players Life Insurance Manufacturers Product (COLI) driven Loose alliances with recordkeepers Mutual Fund Manufacturers Product (Mutual Funds) driven Recordkeep on 401(k) platform Executive Benefit Consultants Nonqualified plans plus other services High-touch and high-expense Unbundled Stand-alone recordkeepers Life insurance agents Attorneys and CPA firms 4

5 Governmental Regulations and 409A Rules Plan documentation Strict compliance with 409A and final regulations Participants need to plan ahead! No getting to money just because Need for effective internal auditing of plan operation W-2 deferral reporting Access taxes and fines on EMPLOYEE when those plans do not conform to the requirements. The BIG Exclusion from 409A Short-term Deferrals. IRC 409A exempts from coverage bonuses and other compensation that is paid up 2-1/2 months after the year it vests (that is, is not subject to a substantial risk of forfeiture as defined in IRC 409A). No 409A issues No Six (6) month waiting for C-Suite of public companies For Registered Representative Information only. Not for use with the general public. Speaker Contact Information Catherine Kroll Vice President, Risk Management DDR Corp CKroll@ddr.com Craig Goesel Senior Managing Director Mesirow Financial cgoesel@mesirowfinancial.com Michael Amoia, JD, LLM (Tax), CFP,CLU, ChFC Vice President, Advanced Sales Crump Life Insurance Services and Potomac Affluent Markets , ext 6431 Michael.Amoia@crump.com 5