Cell Company Overview and Innovative Applications

Similar documents
P1: PRE CONFERENCE SESSION: Introduction to Captive Insurance Monday, October 21, 2013, 3:00 pm to 5:00 pm

PC2: Introduction to Captives

CONDENSED CONSOLIDATED BALANCE SHEET AXIS Ventures Reinsurance Limited As at December 31, 2017 expressed in United States Dollars

COMBINED ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 OF THE CONDITION AND AFFAIRS OF THE

Employee Benefits & Captives. A presentation for the International Employee Benefits Association. London, October 7 th 2008

Successful Captives: Three Case Studies

Introduction to STOP LOSS CAPTIVES

Captives/RRGs 101-the Basics of Alternative Risk Transfer

Basic Reinsurance Concepts

Cell Captives: Innovation and Expansion. Thursday, Jan :15 12:15

Years ended December 31, 2017 and 2016 with Report of Independent Auditors

Minnesota Workers' Compensation Assigned Risk Plan

Statutory Financial Statements. December 31, 2015 and With Independent Auditors Report

Ratemaking for Captives and Alternative Market Vehicles

AEQUICAP INSURANCE COMPANY

FINANCIAL SERVICES BOARD INSURANCE DEPARTMENT

WESTERN SUMMIT LLC. Glossary

Revised Educational Note. Premium Liabilities. Committee on Property and Casualty Insurance Financial Reporting. March 2015.

Offshore Cell Captive World (>20) Protected Cell Captives 101. Cell Company Structure. Segregated Accounts Company (SAC) Separate Accounts Company

Reinsurance Structures and Pricing Pro-Rata Treaties. Care Reinsurance Boot Camp Josh Fishman, FCAS, MAAA August 12, 2013

COMBINED ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 OF THE CONDITION AND AFFAIRS OF THE

COMBINED ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 OF THE CONDITION AND AFFAIRS OF THE

A Captive Primer: What they are and how they work. Educate Evaluate Elevate

Today s Presentation OVERVIEW OF SPONSORED INSURANCE PROGRAMS THE NEXT GENERATION OF ASSOCIATION SPONSORED INSURANCE PROGRAMS WEBINAR

January 31, 2014 Page 1 of 12 PENNSYLVANIA AND DELAWARE CALL FOR EXPERIENCE #9

CASTLEPOINT FLORIDA INSURANCE COMPANY

Allstate Life Insurance Group Combined Management Discussion and Analysis For the Year Ended December 31, 2011

Minnesota Workers' Compensation Assigned Risk Plan. Financial Statements Together with Independent Auditors' Report

NAIC Group Code 0008 NAIC Company Code Employer s ID Number

Minnesota Workers' Compensation Assigned Risk Plan. Financial Statements Together with Independent Auditors' Report

COMBINED ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2016 OF THE CONDITION AND AFFAIRS OF THE

Copyright 2015 The Ins4tutes

Starr Insurance & Reinsurance Limited and Subsidiaries

Manager Federal Insurance Tax. Contact:

CAPTIVE INSURANCE: Primer and Federal Tax Overview. November 2009

Captive Insurance Company FAQs

NAIC Group Code 0008 NAIC Company Code 00086

Captive Insurance Overview

Q02. Statement for March 31, 2017 of the

OLYMPUS INSURANCE COMPANY

The Purpose of a Captive Captives vs. Traditional Insurance Structuring a Captive Determining the Feasibility and Goals of a Captive Domicile

Second Revision Educational Note. Premium Liabilities. Committee on Property and Casualty Insurance Financial Reporting. July 2016.

CONDENSED BALANCE SHEET Split Rock Insurance, Ltd. As at December 31, 2016 expressed in ['000s] United States Dollars

FORM CR-F INDEX. Part 1 Assumed Reinsurance Property/Casualty Business. Part 2 Ceded Reinsurance Property/Casualty Business

Energy Insurance Mutual Limited. Audited Financial Statements. Years ended December 31, 2017 and 2016 with Report of Independent Auditors

Captive Solutions. - Ken Gumbiner Head Accident & Health Sales North America

American International Reinsurance Company, Ltd. and Subsidiary Audited GAAP Consolidated Financial Statements. December 31, 2017 and 2016

Captive 101-Back to the Basics

Q02. Statement for March 31, 2017 of the

Q02. Statement for June 30, 2018 of the

Texas FAIR Plan Association

ECCLESIA ASSURANCE COMPANY. Financial Statements. December 31, 2010 and (With Independent Auditors Report Thereon)

NAIC FORM CR-F INDEX. Part 1 Assumed Reinsurance Property/Casualty Business Part 2 Ceded Reinsurance Property/Casualty Business...

Minnesota Workers' Compensation Assigned Risk Plan. Financial Statements Together with Independent Auditors' Report

Financial Reinsurance Proven concepts in a changing world

THIS SESSION WILL USE POLLING!

CONSOLIDATED CONDENSED BALANCE SHEET Argus International Life Bermuda Limited As at March 31, 2017 expressed in ['000s] Bermuda Dollars

EXAMINATION REPORT BUSINESSFIRST INSURANCE COMPANY LAKELAND, FLORIDA AS OF DECEMBER 31, 2014

CASTLEPOINT FLORIDA INSURANCE COMPANY

Management s Responsibility for the Condensed Statutory-Basis Financial Statements

Pooling in Microcaptives

WCIRB Financial Call Data Certification through March 31, 2018 (CA-DC-2017)

Annual Statement for the year 2016 of the GENWORTH FINANCIAL ASSURANCE CORPORATION ASSETS

BARBADOS REGULATORY ENVIRONMENT AND RENT A CAPTIVES MARCH 2018

Self-Insuring Worker s Compensation through a Tennessee Captive

GULFSTREAM PROPERTY AND CASUALTY INSURANCE COMPANY

COMBINED ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2016 OF THE CONDITION AND AFFAIRS OF THE

Reinsurance Optimization The Theoretical and Practical Aspects Subhash Chandra Aon Benfield

TWIN CITY FIRE INSURANCE COMPANY ASSETS

Reinsurance 101: an Overview Session 107

ACE INA Overseas Insurance Company and its subsidiaries (Incorporated in Bermuda)

CASTLEPOINT NATIONAL INSURANCE COMPANY, in liquidation. Selected Financial Information and Analysis September 30, 2018

Metropolitan Property and Casualty Insurance Company ASSETS

EDISON INSURANCE COMPANY

Metropolitan Property and Casualty Insurance Company ASSETS

CAPTIVE INSURANCE TAXES: Is the Strike Zone Narrowing. GARY BOWERS Johnson Lambert LLP Raleigh, NC

Captive Insurance Company Glossary

THIS SESSION WILL USE POLLING!

Captive Insurance Arrangements For Small Companies

Erie Insurance Company of New York ASSETS

Annual Statement for the year 2016 of the GENWORTH MORTGAGE INSURANCE CORPORATION ASSETS

IC Chapter Limited Purpose Subsidiary Life Insurance Companies

LARGE DEDUCTIBLE WORKERS COMPENSATION INSURER SURVEY REPORT TO THE NAIC/IAIABC JOINT WORKING GROUP

WATFORD RE LTD. AND SUBSIDIARIES

resources that fuel your competitive advantage

Metropolitan Direct Property and Casualty Insurance Company ASSETS

Rating and Ratemaking

NEW JERSEY CAPTIVE ANNUAL REPORT FORM INSTRUCTIONS

Statutory Financial Statements and Report of Independent Certified Public Accountants MASSACHUSETTS CATHOLIC SELF-INSURANCE GROUP, INC.

Tuesday, March 17, 2015 Houston, TX. 3:45 5:00 p.m. CAPTIVATING RISK: ART MARKET AND CAPTIVE SOLUTIONS

Time for a Captive Refresh?

COMBINED ANNUAL STATEMENT

Captive 101. Presenter Names. Robert J. Schuhriemen Alliant Insurance Services, Inc

SEGREGATED CELL CAPTIVES. Arthur D. Perschetz, Esquire Kilpatrick Stockton LLP

CAS REINSURANCE RUN-OFF AS A BUSINESS

MAINE EMPLOYERS MUTUAL INSURANCE COMPANY FINANCIAL STATEMENTS (STATUTORY BASIS) DECEMBER 31, 2013 AND 2012

OHIO PLAN RISK MANAGEMENT, INC. Columbus, Ohio. FINANCIAL STATEMENTS December 31, 2015 and 2014

Trisura Group Ltd. Management s Discussion and Analysis For the third quarter ended September 30, 2018

Reinsurance (Passing grade for this exam is 74)

EXAMINATION REPORT PURE INSURANCE COMPANY FORT LAUDERDALE, FLORIDA AS OF DECEMBER 31, 2014

Transcription:

Cell Company Overview and Innovative Applications 2018 World Captive Forum January 31 February 2, 2018 Fort Lauderdale, FL #WorldCaptiveForum

Presenters: Les Boughner Chairman Advantage Insurance Management LLC David Provost Deputy Commissioner Vermont Dept. of Insurance Eric Halter Director Alternative Markets AF Group

RENT - A - CAPTIVE

RENT - A - CAPTIVE Assets and Liabilities Technically Comingled Stop Loss Protection purchased for each account. Designed to be a Matched Portfolio.

PROTECTED CELL COMPANY

PROTECTED CELL COMPANY PCC / SPC / SAC ONE SINGLE LEGAL ENTITY. Cell (PCC) is not a separate entity. Assets are owned by the PCC itself and not by the individual cells. Cells cannot contract with each other. GOVERNANCE Managed in accordance with its operating agreement. Directors have a Duty to inform external parties they are dealing with a PCC.

INCORPORATED CELL COMPANY

INCORPORATED CELL LEGISLATION Expanded PCC Legislation. ICC Legally Recognized Entity. Distinct and Separate. Insurance Regulator will require the ICC to meet the standard requirements of a standalone Captive.

SERIES LLC

SERIES LLC Delaware 1996 Series LLC. First Captive Licensed in Delaware in 2010. Delaware Law updated in 2015. Series Captive Insurance Company Operational Cost efficiencies. Premium taxes. Audits. Actuarial Reviews.

Organizations Represented: AF Group $1.4B of workers compensation writings Five primary brand entities: Accident Fund Insurance Company of America United Heartland CompWest Third Coast Underwriters AF Specialty National footprint AM Best A(-) Positive Outlook AF Specialty Commercial multi-line fronting Captive support Fronting strengths: A(-) Positive Outlook rated carriers with broad licensing in the majority of the states with no channel conflict outside of workers compensation Strong capital position Ability to take risk Strong reinsurance support Future E & S capacity Wide risk appetite Strong core insurance resources

AF Specialty Use of Captives To provide our 2,500 agents with a defensive posture for those accounts on renewal that have been provided a captive solution by a competing Agent.; To enhance the reinsurance structure for fronting arrangements entered in to by AF Specialty; To provide our 2,500 agents an ability to form captives for their qualifying Insureds for non-workers compensation exposures; To enhance larger agency profitability, agency captives; and To provide a trusted partner to step-in to those opportunities needing a new captive manager or captive consulting services.

Existing Client Defensive Posture on Renewal Actual Client Client since 2008 Workers compensation exposure Guaranteed Cost Renewal premium $3.5M Loss experience superior Established controls to minimize loss incurrence Policy Year Written Premium Earned Premium Incurred Losses Loss Ratio 2008 $ 470,512 $ 470,512 $ 45,483 9.7% 2009 828,491 828,491 4,364 0.5% 2010 1,103,021 1,103,021 572,978 51.9% 2011 1,331,595 1,331,595 144,004 10.8% 2012 1,827,220 1,827,220 324,592 17.8% 2013 2,459,133 2,459,133 332,639 13.5% 2014 2,518,782 2,518,782 430,984 17.1% 2015 2,908,492 2,908,492 163,578 5.6% 2016 3,337,082 1,882,177 115,800 6.2% Totals $ 16,784,328 $ 15,329,423 $ 2,134,423 13.9%

Existing Client Defensive Posture on Renewal Fiscal Year 2012 2013 2014 2015 2016 2017 Notes Estimated (Est) / Actual (Act) / Current Year (CY) Act Act Act Act CY Est Gross Premium A $ 1,827,220 $ 2,459,133 $ 2,518,782 $ 2,908,492 $ 3,337,082 $ 3,500,000 Losses as of the report date: 01/27/2017 B 324,592 332,639 430,984 163,578 430,049 451,044 Ultiamte Incurred Loss Ratio (No IBNR) C 17.8% 13.5% 17.1% 5.6% 12.9% 12.9% Cost Comparison Guaranteed Cost L $ 1,827,220 $ 2,459,133 $ 2,518,782 $ 2,908,492 $ 3,337,082 $ 3,500,000 Cost After Utilization of Captive M $ 1,200,874 $ 1,473,797 $ 1,589,745 $ 1,528,347 $ 1,965,322 $ 2,059,160 Policy Year Savings $ 626,346 $ 985,336 $ 929,037 $ 1,380,145 $ 1,371,760 $ 1,440,840 Cumulative Guaranteed Cost N $ 1,827,220 $ 4,286,353 $ 6,805,135 $ 9,713,627 $ 13,050,709 $ 16,550,709 Cumulative Captive Cost O 1,200,874 2,674,671 4,264,416 5,792,763 7,758,085 9,817,245 Cumulative Savings Utilizing A Captive P 626,346 1,611,682 2,540,719 3,920,864 5,292,624 6,733,464

Existing Client Defensive Posture on Renewal

Existing Client Defensive Posture on Renewal QUOTA SHARE Total Program Program AF Description Estimated Premium $ 3,500,000 $ 3,150,000 $ 350,000 Quota Share 100.0% 90.0% 10.0% Aggregate 75.0% 75.0% Program Expenses 40.0% 40.0% Attachment Point 60.0% 60.0% Aggregate - $ $ 2,625,000 $ 2,415,000 $ 210,000 Ceded Premiums - $ $ 3,150,000 Program Expense - $ 1,260,000 Net Ceded Premium - $ $ 1,890,000 Aggregate Liability $ 2,415,000 Net Ceded Premium (Loss Fund) 1,890,000 Gap to Collateralize $ 525,000 Collateral As a % of Gross Premium 15.0% Collateral As a % of Ceded Premium 16.7%

Existing Client Defensive Posture on Renewal Estimated Estimated Estimated Estimated Estimated Estimated Loss Ratio 30.00% 40.00% 50.00% 60.00% 70.00% 75.00% Underwriting Income Premiums Earned $ 3,150,000 $ 3,150,000 $ 3,150,000 $ 3,150,000 $ 3,150,000 $ 3,150,000 Underwriting Expenses Program expenses 1,260,000 $ 1,260,000 $ 1,260,000 $ 1,260,000 $ 1,260,000 $ 1,260,000 Claim incurred 945,000 1,260,000 1,575,000 1,890,000 2,240,000 2,415,000 Net Underwriting Income $ 945,000 $ 630,000 $ 315,000 $ - $ (350,000) $ (525,000) Net Underwriting Margin 30.0% 20.0% 10.0% 0.0% -11.1% -16.7% Administration Expenses Captive management fee $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 Premium Tax - - - - - - Government Fee 1,220 1,220 1,220 1,220 1,220 1,220 Audit Fee 5,000 5,000 5,000 5,000 5,000 5,000 Miscellaneous Charges 37,000 37,000 37,000 37,000 37,000 37,000 Letter of Credit - - - - - - Income from Insurance Operations $ 876,780 $ 561,780 $ 246,780 $ (68,220) $ (418,220) $ (593,220) Net Underwriting Margin 27.8% 17.8% 7.8% -2.2% -13.3% -18.8% Collateral Placed for Securitization of GAP $ 525,000 $ 525,000 $ 525,000 $ 525,000 $ 525,000 $ 525,000 Reduction of Collateral for Loss Activity - - - - (350,000) (525,000) Collateral Remaining $ 525,000 $ 525,000 $ 525,000 $ 525,000 $ 175,000 $ -

Existing Client Defensive Posture on Renewal Estimated Estimated Estimated Estimated Estimated Estimated Loss Ratio 30.00% 40.00% 50.00% 60.00% 70.00% 75.00% Total Initial Cost of Program Premium- Gross Basis $ 3,500,000.00 $ 3,500,000.00 $ 3,500,000.00 $ 3,500,000.00 $ 3,500,000.00 $ 3,500,000.00 Captive Formation 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 Annual Management Fees 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 Annual Captive Admin Cost 18,220.00 18,220.00 18,220.00 18,220.00 18,220.00 18,220.00 Assessments/Expense Constant Total Costs $ 3,568,220.00 $ 3,568,220.00 $ 3,568,220.00 $ 3,568,220.00 $ 3,568,220.00 $ 3,568,220.00 Collateral Erosion $ - $ - $ - $ - $ 350,000.00 $ 525,000.00 Ultimate Cost of Insurance $ 2,623,220.00 $ 2,938,220.00 $ 3,253,220.00 $ 3,568,220.00 $ 3,918,220.00 $ 4,093,220.00 Cost of Captive - annual 43,220.00 43,220.00 43,220.00 43,220.00 43,220.00 43,220.00 One time charge 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00

Reinsurance Support for Fronting Arrangements Insurance Carrier Workers compensation exposure Program Premium $40.0M Statutory Limits National footprint Marketing provided by Carrier MGA Underwriting provided by Carrier Claims to be provided by carrier Statutory reporting provided by AF Group Captive in Vermont Captive Management

Reinsurance Support for Fronting Arrangements State Act (per accident) AF Group Retained layer Statutory Limits Excess of $1 Million Each Accident Carrier Captive 50% quota share $500,000 xs $500,000 AF retained layer 50% quota share $500,000 xs $500,000 ALAE is pro rata (subject to a maximum of $500,000 Any one event) Carrier Captive $500,000 Each Accident AF Group Brand

Reinsurance Support for Non-Workers Compensation Exposure Current Workers Compensation Insured Owns 1,500 franchise locations Initially seeking deductible reimbursement captive Economics of deal did not make the captive a viable option As alternative, AF Specialty Analyzed all traditional coverages All properties are leased Carrier supported property contents of each location Leases did not require AM Best rated paper Insured financially astute Captive formed to cover property contents replacing current carrier

Reinsurance Support for Non-Workers Compensation Exposure $850k or $1.0M xs $150K Each Occurrence $150,000 xs $25,000 Each Occurrence Captive Layer to $25,000 Each Occurrence Captive Limit $850K and $1.0M Dependent on Location

Reinsurance Support for Non-Workers Compensation Exposure

AF Group Brand Agency Captives Qualification: Affiliated with Brand greater than 3 years Minimum premium volume $3.0M Maximum loss ratio for 3 year period 40.0% Required to discontinue participation in Agency Profit Sharing Programs Workers compensation only Advantages: Financial alignment with the cedant carrier Share in the underwriting results from an established portfolio Ability to share in investment income generated by underwriting profitability Coverage Stability Cost Stability Alternatives for questionable risks Enhancement of Agency Profitability as an alternative to only commission income.

AF Group Brand Agency Captives Policy Written Earned Policy Total Incurred Year Premium Premium Count Incurred Loss Ratio 2007 $ 59,177 59,177 2 16,128 27.3% 2008 643,153 643,153 36 148,501 23.1% 2009 838,985 838,985 74 145,977 17.4% 2010 1,298,933 1,298,933 108 879,904 67.7% 2011 1,001,882 1,001,882 105 550,373 54.9% 2012 1,297,340 1,297,340 115 197,969 15.3% 2013 1,658,419 1,658,419 121 281,806 17.0% 2014 2,151,368 2,151,368 133 810,771 37.7% 2015 2,613,177 2,613,177 157 852,611 32.6% 2016 2,683,303 2,683,303 165 577,868 21.5% 2017 2,807,282 1,199,924 209 246,641 20.6% Totals $ 17,053,019 $ 15,445,661 1,225.0 $ 4,708,549 30.5% Last 3 yrs. $ 8,103,762 $ 6,496,404 531.0 $ 1,677,120 25.8%

AF Group Brand Agency Captives Policyholder Policyholder Policyholder Policyholder Insurance Agency Underwriting profit Policy Issuing Carrier Paid claims Ceded premium Segregated Cell Portfolio

AF Group Brand Agency Captives

AF Group Brand Agency Captives QUOTA SHARE Total Program Program AF Description Estimated Premium $ 3,000,000 $ 1,500,000 $ 1,500,000 Quota Share 100.0% 50.0% 50.0% Aggregate 73.0% 73.0% Program Expenses 42.0% 42.0% Attachment Point 58.0% 58.0% Aggregate - $ $ 2,190,000 $ 1,095,000 $ 1,095,000 Ceded Premiums - $ $ 1,500,000 Program Expense - $ 630,000 Net Ceded Premium - $ $ 870,000 Aggregate Liability $ 1,095,000 Net Ceded Premium (Loss Fund) 870,000 Gap to Collateralize $ 225,000 Collateral As a % of Gross Premium 7.5% Collateral As a % of Ceded Premium 15.0%

AF Group Brand Agency Captives Estimated Estimated Estimated Estimated Estimated Estimated Loss Ratio 30.00% 40.00% 50.00% 60.00% 70.00% 75.00% Underwriting Income Premiums Earned $ 1,500,000 $ 1,500,000 $ 1,500,000 $ 1,500,000 $ 1,500,000 $ 1,500,000 Underwriting Expenses Program expenses 630,000 $ 630,000 $ 630,000 $ 630,000 $ 630,000 $ 630,000 Claim incurred 450,000 600,000 750,000 900,000 1,005,000 1,155,000 Net Underwriting Income $ 420,000 $ 270,000 $ 120,000 $ (30,000) $ (135,000) $ (285,000) Net Underwriting Margin 28.0% 18.0% 8.0% -2.0% -9.0% -19.0% Administration Expenses Captive management fee $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 Premium Tax 3,375 3,375 3,375 3,375 3,375 3,375 Government Fee 1,220 1,220 1,220 1,220 1,220 1,220 Audit Fee 5,000 5,000 5,000 5,000 5,000 5,000 Miscellaneous Charges 25,000 25,000 25,000 25,000 25,000 25,000 Letter of Credit - - - - - - Income from Insurance Operations $ 360,405 $ 210,405 $ 60,405 $ (89,595) $ (194,595) $ (344,595) Net Underwriting Margin 24.0% 14.0% 4.0% -6.0% -13.0% -23.0% Collateral Placed for Securitization of GAP $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 $ 225,000 Reduction of Collateral for Loss Activity - - - (30,000) (135,000) (285,000) Collateral Remaining $ 225,000 $ 225,000 $ 225,000 $ 195,000 $ 90,000 $ (60,000)

Q & A Les Boughner Chairman Advantage Insurance Management LLC l.boughner@aihusa.com David Provost Deputy Commissioner Vermont Dept. of Insurance david.provost@vermont.gov Eric M. Halter, CPA Director AF Specialty & AF Group Eric.Halter@accidentfund.com Direct 704-554-4751 or Cell 704-574-9343