With the extended downturn in the economy, most workers' compensation insurance companies find themselves with a combined loss ratio in excess of 100, which means they are losing money. When insurance companies start losing money, they start raising their premium rates. In response to rising insurance cost, many employers are considering self-insurance for their workers’ comp coverage.
The financial considerations for self-insurance include lower insurance cost, lower claim adjusting cost, better claim management, and lower state assessments. Other considerations include better integration of safety programs, better employee relations, and better management control.
Lower Insurance Cost
The lower cost of insurance is the initial reason most employers consider self-insuring. When an employer purchases insurance from an insurance company, the amount paid for the insurance premium includes:
1. The cost of claims.
2. The cost of administering those claims.
3. The operating expenses of the insurance company.
4. The insurance company's profit.
By self-insuring employers eliminate the insurance company's profit and the insurance company operating expenses (but assumes additional operating expenses of their own).
The employer is able to self-insure because the amount of workers’ comp losses are predictable based on experience. By knowing the amount of predictable losses, the employer self-insures for those amounts and purchases an excess insurance policy only for the losses deviating above the norm. Thus, the self-insurer purchases less insurance than would be purchased through a full-coverage workers’ comp insurance policy.
Lower Claim Adjusting Cost
While the Fortune 500 companies operate their self-insurance programs in many states, most self-insured operate in one state or a few states. Smaller operations allow them to use the services of the smaller third party administrators (TPA) able to provide excellent claim services at prices below what national and international TPAs must charge. The smaller local or regional claim administrators are more flexible in crafting and pricing the claims administration program to the needs of the self-insured employer.
Better Claim Management
When the insurance company adjuster is handling an employer's workers’ comp claims, the adjuster tend to want to do things his/her own way. While an employer may make recommendations and suggestions to the adjuster, in the end the adjuster follows the instructions of the claim office supervisor, not the employer’s wishes. When the TPA's adjuster is handling the workers’ comp claim, the self-insurer/employer the boss. The recommendations, suggestions, and directions provided by the employer will be closely followed by the TPA adjuster.
Assessments and Taxes
The cost of state assessments and taxes are included in the insurance policy from the workers’ comp insurer. The insurance carrier pays required assessments not levied on self-insurers. These include: the state assigned risk pool, the second injury fund, and insurance guarantee fund. When these assessments are levied on the self-insured they are lower because the insurance company assessment is based on premiums while the self-insured pays the assessment base on claim payments.
However, assessments do not always go in the favor of the self-insured company. Some states require self-insured companies to pay into a state self-insurance insolvency fund to cover claims from self-insurers who are insolvent.
Safety Programs
Companies switching to self-insurance almost always improve their safety programs to reduce or eliminate as many workers’ comp claims as possible. The employer who properly manages the loss prevention program will find the cost savings from workers’ comp self-insurance to be substantial.
Integration between the self-insurance program and the loss prevention program is much more complete within the employers who self-insure. When the insurance company is paying the claims, the motivation to prevent injuries is there but is not felt strongly. There is a greater motivation to get the most out of the loss prevention program when your company is paying the claims.
Employee Relations
A side benefit to the self-insuring employer is the ability to build better employee relations when an employee is injured. Employees often find comfort in the fact that their employer is in contact with them and it will be their employer making the decisions on their workers’ comp claim rather than an adjuster of an insurance company.
Management Control
Self-insurance often blends into the management philosophy of many employers who feel more comfortable being in control of the cost of the corporation. The self-insurance program allows the employer to participate actively in the claim management process and the associated cost of the claims. (workersxzcompxzkit)
Summary
Self-insurance allows the employer to reduce the cost of the workers’ comp insurance program. The self-insurer benefits from lower insurance premium/loss cost, lower claim handling cost, has better claims management, and lower assessment and taxes. The self-insurer also benefits from a more integrated safety program, better employee relations, and stronger management control. For more information on self-insurance programs, please contact us.
Author Rebecca Shafer, Attorney/Consultant, President, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. Contact: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
FREE WC IQ Test: http://www.workerscompkit.com/intro/
WC Books: http://www.reduceyourworkerscomp.com/workers-comp-books-manuals.php
WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php
TD Calculator: http://www.reduceyourworkerscomp.com/transitional-duty-cost-calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com
Numerous states have assigned risk plans for workers' compensation. These plans provide workers' compensation coverage for employers who are required to have coverage but are unable to obtain the coverage from the standard insurance carriers within their state. It is often thought assigned risk plans are for employers with unsatisfactory loss history or for employers in hazardous occupations. While these are reasons employers end up in assigned risk plans for workers' compensation, there are various other reasons as well.
New businesses and small businesses without loss experience history often have difficulty in obtaining work comp insurance and have to obtain their work comp coverage from the assigned risk plans. Assigned risk plans in some cases can be the lowest cost option for the employer, especially for employers who have been canceled by their former insurance company. Also companies in high-risk fields, companies with poor loss experience and companies with poor payment history end up in assigned risk plans.
Small employers may end up in assigned risk plans simply because their small number of employee results in their workers’ compensation insurance premium being lower than the amount the standard work comp carriers will accept. Many work comp carriers will set a minimum premium of $2,500 which is more than the experience rated premium should be for the very small employer.
Employers in assigned risk plans are often involved in occupations with higher than average risk such as the construction trades, trucking,
logging, farming and heavy manufacturing.
The loss history and payment experience of these employers is also often the reason they are unable to obtain workers' compensation coverage from standard insurance companies.
In some situations the employer relies on the insurance agent to locate and purchase the coverage for workers’ compensation. The employers often have no knowledge of insurance and are not involved in making the decision as to where to obtain work comp insurance. Many times the employers placed in the assigned risk plans are unaware they are in the assigned risk plan or they do not know why they are in the assigned risk plan.
In some states as much as 75% of employers in the assigned risk plans will be new and small businesses. The assigned risk plan will provide the required workers’ compensation coverage while the business develops enough loss experience history for standard work comp carriers to be able to rate the business. Typically the new business will have enough loss history within three years to be rated by the standard work comp insurers and will leave the assigned risk plan.
A problem often associated with assigned risk plans is the use of a guaranteed cost program where the premiums are set with no regard to the actual losses incurred by the employer. This often results in the assigned risk plan losing money. In most states the remedy for the underwriting loss is to make an assessment against the standard insurance carriers, which they pass on to their policyholders. This results in the employers not in the assigned risk plan subsidizing the employers who are in the assigned risk pool.
If the assigned risk plan uses retrospective rating where they can assess the employer additional premium based on the employer's actual loss history, the employer bears the cost of its loss history, subject to caps on the maximum additional premium.
If an employer (other than a new business) has remained in an assigned risk plan for more than two years due to a poor loss history, the employer should be considering an in-depth review of their safety program and their risk management program. A determination should be made as to what were the causes of the injuries and what can be done to prevent the injuries from occurring. They should take advantage of the assigned risk plan's safety programs (or they can contact us about our safety course
Some employers remain in the assigned risk plan when they no longer need to do so. If an employer has remained in the assigned risk plan for more than two years, the employer should be consulting with their broker or agent to see if they can obtain better work comp rates outside of the assigned risk plan. (workersxzcompxzkit)
Summary:
Assigned risk plans are necessary for those employers who are unable to obtain workers’ compensation coverage from the standard insurance companies. The employers who are in assigned risk plans should be reviewing their risk management and safety programs for ways to improve their loss history. As assigned risk plans normally have higher premiums than standard workers’ compensation insurance, the employers should seek work comp coverage from the insurance companies available to them.
Author Rebecca Shafer J.D., Consultant, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. She can be contacted at: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
Podcast/Webcast: Occupational Health Strategies Click Here:
WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.
© 2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ ReduceYourWorkersComp.com.
A captive insurance company is an insurance company owned by the parent company or a group of businesses (hereafter referred to as the parent company) for the purpose of insuring its own risk. The primary business of the parent company is normally outside of the insurance field. By the parent company setting up its own insurance company, the parent company utilizes the captive insurance company as a risk management technique to better manage the associated cost of insurance, whether it is for workers' compensation, liability, property or other loss exposure of the parent company.
Captive Structure:
By definition, a captive insurance company writes insurance coverage exclusively for the parent company. As the insurance company is owned by the parent company/policyholder, the insurance company is “captive” to the policyholder.
While the parent company is often a large corporation, the parent company can be a group of businesses in the same business, for example several home builders within a state, or several owners within a professional sports league. When the parent of the captive is one company, the captive is called a pure captive. When the parent of the captive is a group like the professional sports league, the captive is referred to as a group captive.
Captives can be either domestic or offshore. The first captives were offshore, primarily in Bermuda, as the capitalization requirements to start an insurance company were lower than the capital requirements in the United States. This allowed the parent company to create the captive insurance company with a lower initial investment and lower reserves. About 20 countries have captive insurance laws with Bermuda and the Cayman Islands having the greatest concentrations of offshore captive insurance companies.
A few states recognizing the potential to bring additional financial business into their states have revised their insurance laws to permit and encourage captive insurance companies. States with statutes providing for domestic captive insurance companies include Vermont, Hawaii, Nevada, Utah, New York, Arizona and South Carolina.
Financial Benefits:
Risk transfer is the primary benefit of the captive insurance company. The parent company transfers the risk of loss to the captive insurance company. While this could be accomplished by the purchase of insurance from a conventional insurance company, the parent company reaps other benefits as well.
The parent company pays the insurance premium to the captive insurance company. The amount of the premium has to be reflective of the anticipated losses. The Generally Accepted Accounting Principles (GAAP) used in the United States do not allow non-insurance companies to accrue or expense anticipated losses until they are measurable and owed. The one exception to the GAAP is for insurance companies to accrue for incurred but not reported losses. This is a major financial advantage to the parent company who has a captive insurance company.
Insurance premiums charged by the conventional insurance company include not only the anticipated cost of claims, but also include the cost of operations (rent, salaries, benefits, etc.) and their profit. Through the use of a captive insurance company, the parent company can reduce the amount paid for the cost of operations and eliminates the amount paid that becomes the profit for the conventional insurance company.
When the loss experience of the captive is lower than expected, the premium paid over and above the amount of the combined losses is kept by the captive insurance company. In essence, as the captive insurance company is owned by the parent company, the parent company benefits from the lower cost of loss.
Claims control is also greater with a captive insurance company. The parent company can dictate what the claims procedures will be, who will handle the claims and exercise some control over the claim payments (this varies by jurisdiction). The delays and hassles often associated in dealing with the claims department of the conventional insurance company are reduced or eliminated.
The use of a captive insurance company also permits the parent company some control over outside market conditions. When the number of claims and associated losses are lower than normal, the captive insurance company will increase its reserves. When the number of claims and associated cost are higher than normal, the captive insurance company will normally only increase its premium cost to the parent company by the amount necessary to cover the losses. If the parent company were using a conventional insurance company, the premium cost would be greater as the conventional insurance company's increased premium would also reflect the increase necessary to maintain their profit margin. (workersxzcompxzkit)
Summary:
Captive Insurance Companies create a financial advantage to the parent company by allowing the parent company greater control of their insurance cost. As more businesses understand the financial advantages of captives, the number of captive insurance companies will continue to grow.
Author Rebecca Shafer, J.D. Risk Consultant, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. She can be contacted at: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
Podcast/Webcast: Occupational Health Strategies
Click Here:
WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.
© 2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ ReduceYourWorkersComp.com.
What is an Alternative Market?
Alternative Markets refers to insuring for risk without using the conventional insurance company approach. There are several methods making up the alternative markets including pure captives, group captives, rent-a-captives, public entity pools, self-insurance plans, large deductible programs, risk retention groups and purchasing groups. The following is a brief explanation of each method.
Pure Captives:
A pure captive insurance company has a single parent company and insures only the risk of the parent company. The pure captive insurance company will have an insurance charter to operate as an insurance company. The parent company will invest the money to set up and start the captive insurance company. The parent company controls the decisions in regards to underwriting, investments and claim operations. The pure captive insurance company will normally have an excess insurance carrier or a re-insurer to cover the cost of claims if they exceed a predetermined limit.
Group Captives:
A group captive insurance company is jointly owned by a group of companies having a homogeneous interest and similar exposures to loss. It is a closely held insurance company with the insurance business being supplied and controlled by its owners. A group captive will operate the same as the pure captive and differs only in having multiple owners as opposed to a single owner.
Rent-A-Captive:
A rent-a-captive (also known as a sponsored captive) is a company providing captive insurance company services and facilities to others for a fee. The rent-a-captive is normally run by a fronting insurance carrier, but can be operated by a broker or a re-insurer. The fees to obtain membership in the rent-a-captive are much lower than what would be necessary monetarily to start a pure captive. The rent-a-captive usually provides services to mid-size companies without the resources to start their own captive. The rent-a-captive differs from the pure captive or group captive in that the member is not an owner and does not have voting control of the captive. The rent-a-captive is normally divided into “cells” in which each member is legally separated from the rest of the members and separated from the liabilities of the other members and the rent-a-captive itself.
Public Entity Pools:
Public entity pools or government pools are a form of risk management where small or mid-size local governments within a single state—towns, small cities, counties, water districts, parks & recreation, public bus lines, etc.,—join together to form a non-profit association to share the risk of loss. The members of the pool collectively self-insure their insurance exposures through a participation agreement. The pool will have a joint underwriting operation in which the participants in the pool assume a predetermined and fixed exposure in all business written.
Self-insurance Plans:
A self-insurance plan describes a company setting aside a pre-determined amount of money to pay for future claims. Using available underwriting information and the laws of large numbers, the amount of money needed to pay future claims is actuarially calculated. This amount of money is placed in reserve to pay the losses as they occur. Like a captive insurance company, the self-insurance plan will normally have an excess insurance carrier or a re-insurer to cover the cost of claims if they exceed a predetermined limit.
Workers’ compensation coverage has relatively predictable amounts of risk and is measurable enough to make it appropriate for self-insurance. Most of the jurisdictions allow companies to self-insure for work comp. Self-insurance plans are the alternative market approach most used in the work comp field.
Large Deductible Programs:
In a large deductible program the insured purchases a policy of insurance from an insurance company. The insured is responsible for reimbursing the insurance company for each claim in the policy period up to a dollar limit. The insured will also have a maximum amount of exposure. To illustrate, the insured would reimburse the insurance company the total amount paid on each claim under $250,000 (the large deductible amount), but when the insured has paid a total of $1,000,000 (a stop loss limit) on all claims, the insurance company will take over and pay all further claim cost during the policy period. The allocated loss adjustment expense (the cost of handling the claim) is often included in the claim cost in the large deductible program.
Risk Retention Group:
A risk retention group is an insurance company owned by the policyholders. Membership in the group is limited to companies in the same type of business. The risk of loss is spread across the group members. Risk retention groups are normally used for medical malpractice, professional liability and products liability. Risk retention groups are normally not used for workers’ compensation. (workersxzcompxzkit)
Purchasing Group:
In Texas, the state statutes allow companies in similar industries to join together in a purchasing group to buy their workers compensation coverage. The companies in the group receive a discount from the workers' compensation carrier. If the insurance company is set up as a mutual company, the members may also receive a group dividend if the insurance company has a profitable year. The purchasing group may also join together to purchase health insurance to receive a group discount.
Author Rebecca Shafer, J.D., President, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers’ Compensation costs, including airlines, healthcare, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. She can be contacted at: RShafer@ReduceYourWorkersComp.com or 860-553-6604.
Podcast/Webcast: Occupational Health Strategies
Click Here:
WC Calculator: http://www.reduceyourworkerscomp.com/calculator.php
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.
© 2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@ ReduceYourWorkersComp.com.
The Workers Comp Kit® Assessment Experience
A captive manager with 50 electrical contractors invited Workers Comp Kit® to give a presentation about assessing workers’ comp post-loss claims management best practices by employers at their annual meeting. As pre-work for the conference, each of the 50 captive members took the assessment on Workers Comp Kit®, and received a National Workers’ Compensation Management Score and List of Recommendations for improving best practices in their workplace. This took each member approximately 30 minutes to answer a series of on-line questions.
As members of the same captive, their scores and recommendations were compiled so they could evaluate how well the group as a whole performed. Scores ranged from 58-92. The Gap Analysis indicated none of the captive members currently had an employee brochure, a communication piece to help educate employees about workers’ compensation procedures and a key to keeping employees in the loop if they are injured.
This gap was used as an opportunity for improvement in a group training exercise that worked as follows.
1. The captive members were broken down into small groups of 8 members.
2. The group as a whole was given a template for an employee brochure from Workers Comp Kit®.
3. Each small group was assigned the task of customizing one section (2-3 paragraphs) of the brochure for their industry.
4. Then the captive manager had their art department design professional artwork for the cover and distributed the enhanced, customized industry-specific brochure to each member of the captive for their own use.
5. On the cover of the brochure space was denoted for each company to insert their name and logo.
6. On the rear of the brochure, workers’ compensation coordinator contact information was included.
In the past, it would not have been possible to determine gaps for a group this size; however, with the automated tool kit, this was all done within a couple hours. (workersxzcompxzkit)
Thus, within a few days each captive member knew what best practices they were missing and began to make changes — starting with the design and development of a customized employee brochure.
Author: Rebecca Shafer, J.D. Rebecca designs and develops workers’ compensation cost containment programs, and is the developer or Workers’ Comp Kit, an on-line automated tool kit with an assessment, benchmarking and improvement plan. Rebecca can be contacted at: 860-786-8286 and email: RShafer@ReduceYourWorkersComp.com. http://www.ReduceYOurWorkersComp.com
WC Calculator: www.reduceyourworkerscomp.com/calculator.php
TD Calculator:www.ReduceYourWorkersComp.com/transitional-duty-cost-calculator.php
Follow Us On Twitter: www.twitter.com/WorkersCompKit
Do not use this information without independent verification.
All state laws vary.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com
Let’s Review with Deanna Slater, a noted authority on captives, from Arthur J. Gallagher ….
A Captive is an insurance company providing insurance to and controlled by its owner(s).
Workers’ Compensation is the line of coverage making the most sense to participate in a captive since there is long lag time when the claim is actually paid out and closed.
There are Eight Top Reasons to Consider a Captive
- Returns underwriting profits and investment income
- Reduces costs
- Improved risk management
- Control over insurance destiny
- Multi-state capabilities
- Addresses coverage or administration issues
- Improves cash flow
- Tax efficient vehicle with offshore and onshore domicile options
Let’s consider Reason #1
Return of underwriting profits and investment income is often the number one reason companies consider a captive as an alternative for their workers’ compensation insurance. After paying their premium and final audit billing they count the dollars spent and scratch their heads when they look at the dollars they had in claims for the year and ask this question:
Why would they pay say $300,000 in premium to an insurance company when they only experienced $50,000 in claims?
An all to frequent scenario leaves a company feeling they are leaving money on the table. The underwriting profit is historically what the insurance company expects to earn on an account after they pay out losses and spend their operating costs. If they can’t make an underwriting profit . . . how do they stay in business? Investment Income is the reason insurance carriers stay in business! However with the market having a bit of a tough time and insurance carriers unable to make a profit on their underwriting or their investment income, they are left with only 2 options:
- Keep rates low and go out of business (some are making this choice).
- Increase rates to start making an underwriting profit.
In a captive, a company pulls out of this insanity and pays premiums based on your OWN history not the industry performance.
You stop subsidizing your competitors and fund your own claims and in a Group Captive arrangement might risk share with other quality companies not Joe Somebody down the street.
You earn investment income on YOUR dollars sitting in your fund to pay out your claims and don’t let the insurance company take away the earning potential of your dollars. (workersxzcompxzkit)
Typically 3 to 4 years after the policy term ends, you reap the rewards as a business owner of the performance of your company’s performance and receive a dividend. A pretty good reason, wouldn’t you think!
Author: DeAnna E. Slater, CIC, AFSB is an Area Vice President with Arthur J. Gallagher Risk Management Services, Inc. in West Fresno, CA. She is a specialist in the alternative market as it relates to reducing workers’ compensation costs. Contact her at deanna_slater@ajg.com or visit her at http://www.captiveexpert.blogspot.com/
Reduce Your Workers Comp: www.ReduceYourWorkersComp.com/
WC 101: www.ReduceYourWorkersComp.com/workers_comp.php
Follow Us On Twitter: www.twitter.com/WorkersCompKit
Do not use this information without independent verification.
All state laws vary.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com
A Captive is an insurance company providing insurance to and controlled by its owner(s).
Workers’ Compensation is the line of coverage making the most sense to participate in a captive since there is long lag time when the claim is actually paid out and closed.
While the money is sitting in a captive and listed as a “reserve,” it continues to earn investment income as well as return of premium (underwriting profit) if the claim closes out for less. The battle of the reserves is over.
Various types of captives are categorized as follows:
1-Single Parent Captive: Is an insurance company formed by one company to insure/fund their own losses. Typically Fortune 500 companies will have their own captive established. No Risk Sharing occurs.
2-Rent-a-Captive: The structure of the captive is established by one entity, i.e. CitiGroup who owns the captive. They then have the actuaries, TPA, loss control, etc already established and larger companies who might pay $3,000,000 in premium or more rent a cell of the captive.
3-Agency Captive: An insurance agency creates a captive to insure their clients. Depending on how the group performs the agency receives investment income or return of underwriting profit, not the company who is insured. This is less common today.
4-Group Captive: Are for middle market companies typically paying premium from $150,000 up to $3,000,000. Each participating company purchases (workersxzcompxzkit) a share of stock and attends board meetings to make decisions as an insurance company. These members share in underwriting profit and investment income as well as risk share with each other. Tight controls on membership are often seen.
5-Homogenous: Same type of company participating. Example: Artisan Trade Contractors program.
6-Heterogeneous: Various types of employers participating ranging from an auto dealership, credit union, contractor, manufacture or food processor.
Author: DeAnna E. Slater, CIC, AFSB is an Area Vice President with Arthur J. Gallagher Risk Management Services, Inc. in West Fresno, CA. She is a specialist in the alternative market as it relates to reducing workers’ compensation costs. Contact her at deanna_slater@ajg.com or visit her at http://www.captiveexpert.blogspot.com/
Click on these links to try it for yourself.
WC Calculator www.ReduceYourWorkersComp.com/calculator.php
TD Calculator www.ReduceYourWorkersComp.com/transitional-duty-cost-calculator.php
WC 101 www.ReduceYourWorkersComp.com/workers_comp.php
Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com
Eight Top Reasons to Consider a Captive
1. Returns underwriting profits and investment income
2. Reduces costs
3. Improved risk management
4. Control over insurance destiny
5. Multi-state capabilities
6. Addresses coverage or administration issues
7. Improves cash flow
8. Tax efficient vehicle with offshore and onshore domicile options
Author: DeAnna E. Slater, CIC, AFSB is an Area Vice President with Arthur J. Gallagher Risk Management Services, Inc. in West Fresno, CA. She is a specialist in the alternative market as it relates to reducing workers’ compensation costs. Contact her at deanna_slater@ajg.com or visit her at http://www.captiveexpert.blogspot.com/
Click on these links to try it for yourself.
WC Calculator www.ReduceYourWorkersComp.com/calculator.php
TD Calculator www.ReduceYourWorkersComp.com/transitional-duty-cost-calculator.php
WC 101 www.ReduceYourWorkersComp.com/workers_comp.php
Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com
What is the Alternative Market?
The Alternative Market or Alternative Risk Transfers (ARTs) is a term used to encompass various types of insurance programs typically retaining some portion of the risk versus transferring all of the risk like in a “traditional” insurance policy. The Alternative Market can be broken down into various types of programs.
1. Self-insurance
2. Risk Retention and Risk Purchasing Groups (RRGs)
3. Captives
4. Rent-A-Captives
5. Sponsored Captives
6. Insurance pools
7. Association Groups
Each type of Alternative Risk Transfer Mechanism has its own purpose and function. However the driving force of all ART programs is to recoup or retain the underwriting profit. Companies who have invested in loss control and have tight control on their claims often experience lower losses. In the traditional (workersxzcompxzkit) market, the insurance carrier collects a premium and uses it to pay the losses of the good and the bad companies.
Companies that participate in ART programs especially captives where they own their own insurance company, realize more control by paying only the claims they incur and not the losses of the bad companies. In addition the profits on invested surplus (underwriting profit) go to the group’s members or captive owner rather than an insurance company.
Author: DeAnna E. Slater, CIC, AFSB is an Area Vice President with Arthur J. Gallagher Risk Management Services, Inc. in West Fresno, CA. She is a specialist in the alternative market as it relates to reducing workers’ compensation costs. Contact her at deanna_slater@ajg.com or visit her at http://www.captiveexpert.blogspot.com/
Click on these links to try it for yourself.
WC Calculator www.ReduceYourWorkersComp.com/calculator.php
TD Calculator www.ReduceYourWorkersComp.com/transitional-duty-cost-calculator.php
WC 101 www.ReduceYourWorkersComp.com/workers_comp.php
Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs.
©2008 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@WorkersCompKit.com
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